Following much speculation, and several aborted attempts, Sprint and T-Mobile agreed to merge in a $26 billion deal.

The wireless merger deal, which regulators still must approve, would leave the U.S. wireless market dominated by three national players.

The all-stock deal would combine Sprint, which has a market value of $26 billion, with T-Mobile, which has a market value of $55 billion, based on Friday’s closing prices. The two companies also have about $60 billion of combined net debt.

Under the terms of the deal, T-Mobile will exchange 9.75 Sprint shares for each T-Mobile share. T-Mobile parent Deutsche Telekom will own 42% of the combined company and Sprint parent SoftBank Group will own 27%. The remaining 31% will be held by the public.

Deutsche Telekom would also control voting rights over 69% of the new company and appoint nine of its 14 directors. The companies said they hope to close the deal in the first half of 2019.

Joining forces would create a wireless provider with nearly 100 million cellphone customers, second only in the U.S. to Verizon Communications Inc. The combined company, which would be called T-Mobile, would be run by T-Mobile CEO John Legere.

“This isn’t a case of going from 4 to 3 wireless companies—there are now at least 7 or 8 big competitors in this converging market,” Mr. Legere said on Sunday. The companies also vowed to boost hiring and spending in the U.S. after the transaction.

Sprint and T-Mobile executives could make the case that times have changed. Investments in 5G infrastructure could blur the lines between cellphone provider, cable company and technology firm. Even using current technologies, Comcast Corp. has rolled out low-cost wireless service to its cable customers that rides on Verizon’s network.

Dish Network Corp. , led by its chairman Charlie Ergen, meanwhile is building a bare-bones wireless network that could be used to link autonomous cars, drones and other machines aside from cellphones. Companies could use that project to argue there are more than four nationwide wireless companies, though it would be a harder sell if Dish avoids directly competing with Sprint and T-Mobile.

Capital Spending

The companies pledged Sunday to invest up to $40 billion on its network and business in the first three years after the deal closes. But the companies, which would employ about 200,000 people and own thousands of retail stores, will also be looking to cut costs. On Sunday, they projected savings totalling $6 billion in annual costs.

Rolling out 5G services will require heavy investment in cellular spectrum and installing hundreds of thousands of antennas around the country, which gave new impetus to Sprint and T-Mobile executives to join forces.

AT&T said it will devote at least $23 billion to capital spending this year, excluding some investments in a new public-safety network. Verizon said it plans to spend at least $17 billion on capital expenditures in 2018. Both budgets are well ahead of Sprint and T-Mobile, which each spend under $10 billion a year on construction, electronics and the like.

Left alone, the spending gap will only widen as companies rush to install 5G equipment. “You can’t win a race by having half the horses,” said Roger Entner, an analyst for telecom consultant Recon Analytics Inc.

Winning the race wouldn’t come cheap. Consulting firm Accenture estimates that U.S. telecom companies together could invest $275 billion over the next seven years to deploy the next-generation wireless technology.

Wireless Employment

Capital spending will create jobs but employment at the companies will likely decline sharply. Retail stores will close. Operations, sales staffs, and technical support operations will merge.

Good Deal for Customers?

Is this a good deal for customers?

Of course! How can it not be?

Both T-Mobile and Sprint customers will have increased coverage.

I wish all the networks could share towers such that coverage was universal. It seems ridiculous for each network to have to build their own towers. When appropriate, why not share?

Press Release

The merger press release cites these benefits.

With Sprint’s expansive 2.5 GHz spectrum, T-Mobile’s nationwide 600 MHz spectrum, and other combined assets, the New T-Mobile plans to create the highest capacity mobile network in U.S. history. Compared to T-Mobile’s network today, the combined company’s network is expected to deliver 15x faster speeds on average nationwide by 2024, with many customers experiencing up to 100x faster speeds than early 4G.

Neither company standing alone can create a nationwide 5G network with the breadth and depth required to fuel the next wave of mobile Internet innovation in the U.S. and answer competitive challenges from abroad.

Neither can AT&T and Verizon in the near term, even though they will still respectively own 34% and 172% more spectrum than the combined company. Even with their vast resources, AT&T and Verizon cannot rapidly build nationwide 5G and their planned 5G networks will only be available sporadically in just a handful of very limited areas. To build nationwide 5G, they either have to kick current customers off LTE, which would take years, or use a type of spectrum (millimeter wave) that can only carry a signal 2,000 feet from a cell site – versus multiple miles for other spectrum – making it nearly impossible for either of them to create a truly nationwide 5G network quickly.

Ubiquitous high-speed 5G service and Internet of Things (“IoT”) capabilities will ignite innovation across industries and create the conditions for U.S. firms and innovators to lead the globe in the 5G era.

“Going from 4G to 5G is like going from black and white to color TV,” added Claure. “It’s a seismic shift – one that only the combined company can unlock nationwide to fuel the next wave of mobile innovation.”

5G for All will unleash incredible benefits and capabilities for consumers and businesses. Imagine, for example, augmented reality heads-up displays that see everything you do, and provide real-time cloud-driven information about the people and objects around you. Imagine never losing anything again because low-cost sensors with decade long battery life are embedded in everything you own. Imagine an earpiece providing real-time translation as a friend speaks to you in another language. Imagine environmental sensors in infrastructure and for agriculture having a profound impact on productivity.

Wireless, broadband, and video markets are rapidly converging. AT&T is now the largest TV provider in the country. Comcast added more wireless phone customers last year than AT&T and Verizon combined, and Charter is launching wireless this year. And, more than 1 in 10 Americans (12%) use wireless as their only Internet or broadband connection, freeing themselves from the grip of the traditional, uncompetitive in-home broadband providers.

Message to Regulators

That last paragraph above is clearly a message to regulators telling them not to fear going from four wireless providers to three while conveniently sniping at ATT's TV service.

Traveler Woes

As a traveler, I frequently find that my phone does not work. When I travel with my wife Liz, usually one of our phones work. I am on ATT and she is on Verizon.

Service in some national parks is nonexistent. I just returned from a trip to Arches and Canyonlands. There is essentially no cell service. Curiously, there was cell service at Delicate Arch, reachable by a 3-mile round-trip hike that starts deep in the interior of the park. It's an uphill trek and the elevation change must have put it in sight of tower.

When I last went to Death Valley, ATT worked in a few spots, but not Verizon. In Glacier National Park, nothing worked anywhere. It is a real pain.