The deployment of 5G competition includes low-band spectrum, mid-band spectrum, millimeter wave and infrastructure development.

Source: Mobile Marketing Magazine

Summary

  • If the cases go through, T-Mobile’s current product offerings (Millimetre Waves 5G and Low Band 5G) and Sprint’s Mid Band 5G spectrum will combine and allow full 5G capacity to be deployed.
  • Investors are optimistic about the merger as Sprint’s stock price has soared from $4.80 to $8.52 (+77.5%) after the announcement. T-Mobile’s stock price has also risen from $84.53 to $94.49 representing an 11% increase.

5G

Source: Qualcomm Development Network

5th-Generation network consists of three spectrums: low band, mid bands and high bands (millimetre waves). They represent the three intensity of the 5th generation network, the stronger it is, the more infrastructure it would require. As shown below, millimetre waves do not go through concrete as low-band or 4G network do, which required 5x network stations than 4th to provide network service in a densed area.

Source: Youtube — MKBHD (5G Explained)

Consumers might have pondered if 5G can replicate the success from 4G due to the sufficient network we share at the moment, demand for faster networks diminishes overtime as an average consumer do not process a lot of data in their daily lives. It is correct and the fact that 5G infrastructures were made to target specific Industrial Internet of Things (IIoT) industries as the followings: healthcare providers, urban management, smart buildings, manufacturing and transportation.

Source: Stata (2019)

AT&T is currently sitting as the largest telecommunication service provider with over 170.72 billion in revenue whereas Verizon, T-Mobile and Sprint followed behind. It is tragic as the nature of telecommunication industry has a high barrier of entry and is priced super competitively. Upon today, there is no one in the industry has full capability to provide 5G network at all spectrums.

T-Mobile

Among the three spectrums, T-Mobile invests heavily on low-band 5G as it demonstrates significant improve comparing to the 4G and it requires less infrastructures to maintain. In addition to their secondary development in millimetre waves spectrum, they have recently begun to offer 5G services in six cities: Atlanta, Cleveland, Dallas, Las Vegas, Los Angeles and New York.

In 2019, T-Mobile has launched “T-Mobile Test Drive”. It was meant to generate feedback loops for the new 600 MHz Extended Range LTE (low band 5G) service plan, American households can register T-Mobile Test Drive online with their personal and household information to receive a pocket-sized hotspot for a 30-days or 30GB of data free trial for their latest service.

Sprint

Among the three spectrum, Sprint specializes in mid-band 5G as they understand they would not be able to capitalize on millimetre waves infrastructure due to its relatively small capital power or complete directly to T-Mobile with low band 5G technology.

Sprint has also developed a strong network functions virtualization (NFV) which essentially contributed hugely to network management. Through separating the controls of each network planes, Sprint is allowed to centralize the view of the network/operation — optimizing the network services by speeding up the reaction time.

Merger Rationale

Source: Forbes

As mentioned, by consolidating T-Mobile’s expertise in land and millimetre waves 5G with Sprint’s Mid-band spectrum capability. The new company is able to offer a full capacity of 5G network service, surpassing Verizon and AT&T, and be able to act as the first company who deploys 5G services commercially to all states in the United States.

Internationally, the United States has fallen behind other countries such as China and South Korea into the 5G development due to United State’s opposition to national security reasons. The US president Trump has signed an executive order earlier in 2019 which involves blocking transactions that involve information or communications technology that “poses an unacceptable risk to the national security.” which was meant to single Huawei’s occupation out in the United States. As a consequence, the U.S 5G development has resulted in a 6–12 months lag behind to China.

However, the merger would incur two major risks as in first resulting to price hikes as decreased competition, second legally and social caution by the United States government as the parent company of T-Mobile and Sprint are owned by Germans and Japanese.

Implication/Analysis

As a result, Sprint’s stocks have risen over 70% and T-Mobile’s stocks have risen over 10% on the next trading day as investors are optimistic about the new company’s prospect as the merger has gone through the deal process and passed the anti-competitive act. Nonetheless, it’d take a few months for integration as it is a 40 billion merger.

One major implication most investors might not have put into consideration was the fact that government has taken a resistant stance into foreign investment and private companies, especially for Bernie Sanders and Elizabeth Warren campaign as they advocate to restrict businesses who have monopoly control. In the future, telecom along with tech giants might have to encounter legal and governmental barriers which would hinder growth.

Conclusion

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