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T-Mobile, Sprint will finally get hitched in $26B mega mobile deal

The combination would create a stronger player to compete against Verizon and AT&T and more effectively jump to 5G.

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T-Mobile CEO John Legere will lead the new combined wireless carrier. 

Sarah Tew/CNET

The years-long wireless industry twist on the will-they-won't-they romantic comedy is finally reaching its climax. T-Mobile and Sprint finally -- finally! -- agreed to get together.

The $26 billion deal would combine the nation's third and fourth largest wireless carriers, creating a larger player to better compete against industry leaders Verizon Wireless and AT&T. Under the deal, T-Mobile parent Deutsche Telekom will assume control of the two businesses, with Sprint parent SoftBank taking seats on the board of the new company, to be called simply T-Mobile.

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T-Mobile CEO John Legere and his management team would take over day-to-day control of the combined business. Sprint CEO Marcelo Claure will be a director of the new board. The deal is expected to close by the first half of 2019. 

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Sprint and T-Mobile could make for a potent combo. 

Roger Cheng/CNET

The merger marks the culmination of years of flirting between T-Mobile and Sprint, which nearly agreed to a merger late last year before talks fell apart in November. As carriers have upped their game to win you over, tossing in everything from unlimited data plans to free Netflix and even a free year of service, the intense environment has the two carriers joining forces -- and resources -- to better compete.

Both companies have made their impact felt on the industry over the last few years. T-Mobile eliminated contracts and phone subsidies and last year led the push to bring unlimited plans back to the industry in a bigger way. Sprint introduced the concept of a phone-leasing plan and in 2017 began offering a year of its service for free. 

No company in the wireless industry has been as effective at turning itself around as T-Mobile, which under firebrand Legere has routinely outstripped the rest of the players in subscriber growth.  It's no surprise he's sticking around.

"This combination will create a fierce competitor with the network scale to deliver more for consumers and business in the form of lower  prices, more innovation, and a second-to-none network experience -- and do it all so much faster than either company could do on its own," he said in a statement.

Better together

Both Legere and Claure vowed the creation of a stronger single player that will both add jobs and more quickly move to 5G. Legere said the deal would actually create jobs, a reversal of the idea that mergers typically leads to work force cuts. 

Marcelo said the deal would "supercharge" the network and do it in a way that offers lower prices than AT&T or Verizon.

Wall Street analysts and industry executives have long said that consolidation was inevitable in this industry. Many pointed to the combination of T-Mobile and Sprint as the most natural pairing.

The combination would mean a larger base of customers and, in turn, more revenue and resources to pour into future investments. At the end of last year, T-Mobile boasted 72.6 million customers, while Sprint had 54.6 million connections.

In comparison, Verizon has 116.2 million connections as of the first quarter, while AT&T boasts 143.8 million, helped by its assets in Mexico.

Sprint and T-Mobile each have valuable spectrum that could theoretically be combined for superior nationwide coverage for customers, although that would be years away. Sprint has a unique band of both high-frequency and low-frequency airwaves great for speed and coverage over distances, although they require special radios, while T-Mobile last year won a valuable swath of low-frequency spectrum it's now rolling out. 

These assets are critical as the industry makes its transition to 5G. All of the carriers are jockeying to be first in the next-generation wireless technology, which promises significantly higher speeds and better, more responsive coverage.

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T-Mobile says it will bring 5G to 30 cities this year, but won't launch the service until the smartphones arrive in 2019. Likewise, Sprint will deploy 5G in six cities this year, and launch next year.

But T-Mobile and Sprint run on different network standards, which complicates the integration process. T-Mobile Chief Operating Officer Mike Sievert, who will stay on as COO of the combined company, pointed to the company's successful of integration of MetroPCS, which also ran on a different standard. He said T-Mobile would migrate the network away from CDMA over the next three years. 

Will this actually happen?

While the two companies have struck a deal, don't count anything out between these two.

T-Mobile and Sprint argue this deal is good for consumers, but consumer advocacy groups are skeptical.

"The government should remain skeptical of any deal that leaves Americans with fewer choices for wireless service," said Jonathan Schwantes, senior policy counsel for Consumers Union, who added the deal raises red flags for consumers. 

The two companies, after all, ended talks late last year because they reportedly couldn't agree on the ownership structure.

They've tried to merge before. Sprint's parent, Japanese carrier SoftBank, tried to strike a deal with T-Mobile majority shareholder Deutsche Telekom in 2014, but dropped its attempt when the government signaled that it favored four national competitors.

The current White House and the Republican-controlled Congress and Federal Communications Commission are more open, so the companies may feel the pressure to close this deal in case a new administration takes over.

Legere and Claure said they had discussed the deal briefly with the FCC commissioners, including Chairman Ajit Pai, and that they were open to learning more about the deal. 

Pai, in particular, has said he's open to any deals in the industry.

So it may be now or never for T-Mobile and Sprint. 

The story was originally published April 29 at 9:29 a.m. PT.
Update 10:36 a.m. PT: Added comments from the executives. 

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