Employees at Bellevue-based T-Mobile have been spared months of layoff speculation with the collapse of a merger deal, which could have led to cuts of an estimated 20,000 jobs. The end of the saga could also lead to more wireless price cuts.
The failure of merger talks between T-Mobile US and Sprint was met with a sigh of relief in Bellevue, where thousands of T-Mobile employees have been spared months of layoff speculation.
The deal, had it gone through, would have come with “brutal cuts,” said Chetan Sharma, an Issaquah-based industry consultant.
The Communications Workers of America and industry analysts had estimated that a deal would eliminate about 20,000 jobs.
It’s unclear how deeply those cuts would have affected the 5,500 employees at T-Mobile’s Bellevue headquarters or how many jobs would have been eliminated at Sprint. But now it’s a moot point — unless, of course, the companies spark up talks once more.
T-Mobile and Sprint, the No. 3 and No. 4 U.S. telecom companies, announced Saturday that they had called off discussions to merge after years of stop-and-go talks. The two companies were not able to agree on terms, they said in a rare joint statement.
The breakdown boiled down to the unwillingness of T-Mobile parent Deutsche Telekom and Sprint parent Softbank Group to part with control of either company.
The end of the saga could benefit consumers, at least in the short term. More competition means more price-cutting, something that has become par for the course in the telecom industry over the past several years.
“It probably hurts the incumbents because the price war will continue,” Sharma said. “AT&T and Verizon will be under constant pressure.”
That strategy has worked well for T-Mobile as it wooed enough customers in the past few years to leapfrog Sprint and become the third-largest U.S. telecom. In previous deal negotiations with Sprint, Deutsche Telekom wanted to offload T-Mobile. But now, the magenta-clad network is one of the most successful parts of the German company’s portfolio.
Although lower wireless prices might be ahead, it’s not all rosy for mobile customers. Over the longer term, a combined Sprint-T-Mobile would have poured more resources into developing and rolling out 5G technology, said Mark Stodden, an analyst with Moody’s Investors Service.
The deal’s end will not do much to rock T-Mobile, which remains in a strong and growing position, analysts say. T-Mobile added 1.3 million customers in its latest quarter and was the big winner of a federal network auction earlier this year. It has been investing heavily in its network technology and marketing campaigns to encourage customers to switch to its unlimited data service.
“T-Mobile is in probably one of the better positions of all the four players because they’re taking share and growing,” Stodden said.
The merger’s collapse took a toll on telecom stocks Monday. Sprint was hit the worst, dropping 11.5 percent to $5.90 Monday while T-Mobile shares fell 5.7 percent to $55.43. AT&T, meanwhile, sank 1.3 percent while Verizon fell 4 percent.
The merger talks are over for now, but the industry is still ripe for consolidation, Sharma said. And the most obvious combination, he said, is still Sprint and T-Mobile.
“I seriously doubt this is the end of it,” he added.