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T-Mobile and Sprint merger: Here's everything you need to know

Is the $26 billion telecom deal in trouble?

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Josh Miller/CNET

T-Mobile and Sprint have been working on a merger that could bring about a seismic shift in the mobile world. But it could just as likely fall apart.

The two carriers in April 2018 announced a $26 billion deal to merge, a combination that would bring together the nation's third- and fourth-largest wireless service providers. The combined company would retain the T-Mobile name, and T-Mobile CEO John Legere and his management team would run day-to-day operations.

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The deal comes at a time when the US carriers are bending over backward to win your business, with offers like unlimited data and freebies such as access to Netflix. Sprint is still giving away a year of service for free. Those competitive pressures have driven T-Mobile and Sprint together. And while executives from both companies vow lower prices and better service, consumer groups and analysts are skeptical.

Indeed, some senators are seeking to kill the deal, and T-Mobile and Sprint executives will appear before lawmakers later Wednesday. In a bid to convince regulators, T-Mobile hired a former commissioner with the Federal Communications Commission and vowed not to raise prices.

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Worried about how this might affect you? CNET breaks down everything you need to know about this mega mobile merger.

Why a merger?

T-Mobile and Sprint have long courted each other. The logic is simple: Verizon and AT&T are far bigger than either of the two companies, and a merger would create a stronger competitor.

Why now?

Actually, T-Mobile and Sprint tried twice before. Back in 2014, Sprint parent SoftBank floated the idea of a deal with T-Mobile, but regulators and the White House were keen on keeping four national competitors.

The current administration and the FCC are more open to deals, which is why both sides got close last year. The deal fell apart in November when SoftBank and T-Mobile parent Deutsche Telekom couldn't agree on how much control each side would get. 

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Then President-elect Donald Trump stands with SoftBank CEO Masayoshi Son.

Spencer Platt/Getty Images

So this deal is a slam dunk, right?

Nope. Analyst opinions on whether the deal will get regulatory approval vary, but many are giving it a 50-50 shot. Remember, the government is trying to kill a deal between AT&T and Time Warner, and those two companies don't compete against each other. 

T-Mobile offering to freeze prices suggested the company needed to work a little harder to convince regulators.

Executives will also get grilled by lawmakers in the House of Representative in two separate committee sessions.

T-Mobile and Sprint are pushing the idea that the merger would create jobs, largely thanks to the resulting company's investment in 5G. In January, they said they'd build five customer service centers after the deal closed.

What's with the hotel controversy?

The day after T-Mobile and Sprint announced the deal, several high-level T-Mobile executives opted to stay at President Donald Trump's Trump International Hotel, according to the Washington Post. Executives would become frequent guests of the hotel, which critics say is an attempt to curry favor with the current administration.

Legere denied any wrongdoing in an interview in February.

Hey, that sounds good

Not so fast. Many analysts note that a key way to cut costs after a merger is the elimination of redundant positions, and that T-Mobile and Sprint wouldn't be any different. 

"It's hard to calculate how a company can achieve $6 billion in primarily cost synergies while growing the employee base," said BTIG Research analyst Walt Piecyk.

OK, but how does this affect me?

In the near term, nothing changes. The deal is supposed to close in the first half, so T-Mobile and Sprint have to keep operating as independent companies until then.

T-Mobile Chief Operating Officer Mike Sievert said in an interview that Un-carrier events are still planned for this year as the status quo remains.

Sprint customers get one near-term benefit: The company struck a roaming deal to let its customers ride on the T-Mobile network if Sprint isn't available, which should yield better coverage in more places. 

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T-Mobile CEO John Legere would lead the new combined company.

CNET

What happens if the deal closes?

That's the million-dollar question. T-Mobile and Sprint promise a combined network that'll deliver better service at lower prices. They argue that their combined scale would help them build out a faster, more efficient network.

"This competition will result in lower prices for Americans," Sievert said. "It will probably result in lower prices across the board."

But consumer advocacy groups are saying the deal raises red flags. 

"If the national wireless market shrinks from essentially four companies to three, history suggests the negative impact on competition would mean higher prices for many people," said Jonathan Schwantes, senior policy counsel for Consumers Union.

So prices could go up?

Potentially. There's a reason why Wall Street likes this deal: Financial analysts think the industry is a little too competitive and that removing one player could ease the pressure.

But given the entrenched positions of Verizon and AT&T, the combined company might still need to pull out all the stops to stay competitive.

"It doesn't matter if you have three or four killers in the room going at each other," said Roger Entner, a consultant with Recon Analytics. "There will be blood on the ground." 

Lopez Research analyst Maribel Lopez said she doesn't buy the idea of lower prices but that she suspects pricing will remain neutral after the deal. 

Didn't Sprint's Marcelo Claure say 5G would be an opportunity to increase prices?

Yep. Claure, now executive chairman of Sprint, said during a keynote address at the Mobile World Congress trade show in March that he sees 5G as an opportunity to charge more, because it would be considered a premium service.

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Sprint CEO Marcelo Claure speaking at MWC 2018. He said then that 5G was an opportunity to charge more for service. 

Roger Cheng/CNET

In an interview in April 2018, Claure said the comments referred to the idea of building a 5G network for just the Sprint base. Combining T-Mobile's and Sprint's assets and building for a much larger base would mean an opportunity to lower prices.

"This changes the game," Claure said.

What happens to existing plans?

Sievert declined to comment on what the companies plan to do with many of the ultracompetitive grandfathered plans that customers have clung to. T-Mobile has generally been good about honoring existing plans within its own service, but it's unclear what it would do with Sprint's plans.

How would the migration happen?

The companies say it would take about three years to migrate customers over to the T-Mobile network. Though both companies support LTE, T-Mobile's older network is based on a technology called GSM, and Sprint's is based on CDMA -- two incompatible networks.

Fortunately, popular phones like some Samsung models and the iPhones on Sprint can run on T-Mobile. Sievert says there are about 20 million Sprint phones that are compatible on T-Mobile.

Eventually, the idea is to get everyone onto the T-Mobile network.

What about 5G?

One of the critical parts of T-Mobile and Sprint's argument for merging is the move to 5G. The companies say neither can build the 5G network they want without a combination, though that hardly would've been the rhetoric had you asked either side before this deal was announced.

The case for 5G leadership is tailor-made for the White House, which killed a proposed takeover of Qualcomm by Singapore-based Broadcom because it threatened the US' position in regard to the next-generation wireless technology.

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T-Mobile and Sprint say they'll invest roughly $40 billion over the next three years on 5G, potentially creating new jobs. 

"We can drag the rest of the players kicking and screaming to the prize, which is American leadership in 5G," Legere said on a call with analysts on Sunday.

In a follow-up interview, Legere touted 5G's ability to drive value for the country.

"There's a secondary game on 5G that's yet to be played," he said, alluding to businesses that could spring up because of the faster and more responsive network.

How does this combination help with 5G?

It's all about spectrum, or the radio airwaves each company holds. T-Mobile owns a large swath of lower-frequency spectrum, which is great for covering long distances, but at lower speeds. It also has a super-high-frequency band known as millimeter wave spectrum, which gives you greater speed and capacity, but at a short range.

Sprint has plenty of spectrum in the midband, a sort of compromise between the two.

The combined portfolio of radio airwaves provides superior coverage in terms of both speed and capacity, particularly in rural areas.

"As we move forward and drive this major investment in a combined network, every dollar we spend here will be a 5G dollar," said T-Mobile Chief Technology Officer Neville Ray.

Can their 5G replace your home broadband? 

Verizon has been testing 5G as a replacement for resident internet access, an idea that both T-Mobile and Sprint previously scoffed at.

But they're changing their tune. Sievert said the merged companies would be able to put together a combined network that delivers average nationwide speeds of 450 megabits per second, or 15 times current average speeds.

The combined network could potentially offer consumers in rural areas an alternative for home broadband service -- even if it's marketed as a wireless service. That's a key difference from Verizon's initial deployment of 5G, which is meant to be a replacement for home broadband, complete with home modem.

"It's purely a way to compete with cable, as opposed to the realities of what we're creating," Legere said.

First published April 29, 2018, 10:36 a.m. PT.
Update, Feb. 13 at 5 a.m.:
Includes additional background and information.

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