The Impact of the T-Mobile/Sprint Merger on the M2M Market

On April 29, 2018, T-Mobile announced plans to acquire Sprint, thereby combining the third and fourth largest mobile network operators in the United States. The acquisition is not yet approved, and it is still unclear whether the deal will be blessed by the FCC and the U.S. Department of Justice. A lot of the focus thus far has been on the total number of subscribers and the impact a merger would have on the competitive environment, with T-Mobile CEO John Legere stating that the proposed merger would lower prices, increase competition, and create a nationwide 5G network. While T-Mobile and Sprint’s combined overall mobile subscribers still falls short of both Verizon and AT&T’s subscribers, the merger would also effectively combine T-Mobile and Sprint’s total M2M connections making them far more competitive in the U.S. M2M market. 

M2M applications have generated a significant amount of additional revenue for cellular operators. While connectivity is one key aspect to any M2M application, the value chain extends beyond the role of the cellular provider. To capitalize on the opportunity within this space, cellular providers are expanding across the value chain to provide one-stop shopping solutions. Additionally, operators can leverage their physical network infrastructures to provide edge computing or other fog-type applications. Each of the main cellular operators in the United States has achieved significant business with M2M connectivity and have developed initiatives to support market growth.

Through their merger, T-Mobile and Sprint are well positioned to compete in the M2M arena, but they will both have to work on developing an established in-house platform to compete more fully with Verizon and AT&T. T-Mobile can effectively leverage Sprint’s existing relationship with the SoftBank Group to more effectively address the growth and needs of M2M, but there will be significant catching up to do. Developers have had access to Verizon’s ThingSpace cloud-based and open API sandbox model platform since 2015 and AT&Ts M2X drag-and-drop platform since 2014. T-Mobile’s early growth rates were behind the rate of the overall U.S. M2M market, and it has attempted to correct its approach to the M2M market by working to deploy the first commercial NB-IoT operation in the United States. However, while Verizon has successfully capitalized on its ThingSpace platform, T-Mobile relies on its partnership with Twilio to provide M2M support for developers. Without a clear strategy and direction for a software platform, the quest for subscriber growth will need more thought leadership and strategic planning.

In theory, the merger should work and create a create a mobile operator that is well positioned to take on Verizon and AT&T within both the consumer, business, and M2M markets. T-Mobile has benefited from successful positioning as the un-carrier in the consumer mobile markets by aggressively cutting prices and helping to reduce the overall cost of wireless service by 19%. While T-Mobile gained market share, this was largely at the expense of Sprint. Now, the companies will have to focus on gaining market share at the expense of Verizon and AT&T. The combination of Sprint’s technology foundation with T-Mobile’s more dynamic marketing and fresh, brand strategy will make a combination that offers a real alternative to the current market leaders.