T-Mobile CEO John Legere and Sprint CEO Marcelo Claure speak to “Squawk on the Street” about inking the $26 billion deal that could shake up the telecommunications sector.
The next generation of wireless technology, known as 5G, is such a leap forward that it’s said to change everything — maybe even the U.S. government’s view of a corporate merger it nixed before.
T-Mobile US Inc. and Sprint Corp. claim the enormous costs of building a 5G network of ultra-fast, ubiquitous connections as a reason to approve T-Mobile’s proposed $26.5 billion purchase of Sprint.
T-Mobile and Sprint announced the 5G network ambitions on Sunday April 29, 2018 after an earlier attempt to merge failed.
Wireless providers say 5G — so named because it is the fifth generation of mobile networks — will connect millions of devices from robots to appliances at speeds that are 10 to 100 times faster than current technology, spurring industries based on artificial intelligence and augmented reality, and developing technology for self-driving cars, remote medicine, maintenance of remote robotics and machinery in the field, and speedy downloads of high-definition movies.
“Global tech leadership for the next decade is at stake,” said John Legere, T-Mobile CEO who would lead the new company, said on Twitter. The combination will create “the only company with the capacity to quickly create a broad and deep nationwide 5G network.”
The United States and the Trump administration previously suggested the creation of a national, government-built 5G network in order to seize leadership of the emerging technology. The government has not moved forward on a 5G infrastructure. Instead, U.S. wireless operators are expected to invest as much as $275 billion nationwide over seven years to build out 5G, according to a report last year by Accenture that was commissioned by the Cellular Telecommunications and Internet Association (CTIA). Sprint, T-Mobile, AT&T Inc. and Verizon Communications Inc. are members of CTIA.
The Federal Communications Commission, which reviews mergers based on whether they are “in the public interest” will judge whether the new merger plans support the public interest. Antitrust authorities at the Justice Department will judge whether a deal harms competition.
Two Democrats in the House replied Monday to Sunday’s news, calling for a hearing, warning the merger would trigger ripple effects for all mobile phone users. The hearing request came from Representative Frank Pallone, of New Jersey, the top Democrat on the Energy and Commerce Committee; and Representative Mike Doyle, of Pennsylvania, the top Democrat on the communications subcommittee.
T-Mobile CEO John Legere and Sprint Chief Executive Officer Marcelo Claure will arrive Washington on Tuesday May 1, 2018, “to talk to everybody who would love to hear the details,” according to Legere. The Justice Department and FCC during Obama’s leadership rejected a merger attempt by Sprint and T-Mobile, concluding that four national competitors are needed to ensure competition. However, FCC Chairman Ajit Pai, who has constructed an entire regulatory framework under the header “Leading the World Toward a 5G Future” with a section on the FCC website, has said he remains open about the number of major carriers in the American mobile market. AT&T and Verizon Wireless are the largest carriers, while T-Mobile and Sprint — the remainder of the top four carriers — have offered lower prices that undercut Verizon and AT&T deals.
Verizon Wireless plans to test 5G in 11 markets this year, working with equipment partners including Ericsson AB and Samsung Electronics Co. On April 25, 2018 Verizon senior vice president and chief technology architect Ed Chan delivered a keynote address at the CTIA Race to 5G event in Washington DC, outlining Verizon’s path to 5G.
Full 5G service isn’t expected to be commercially available until 2020, but Verizon claims to be the leader in the race to make 5G a reality, and says they’re on track to be first to deploy 5G fixed broadband service and a 5G mobile solution in the U.S.
Verizon announced the opening of 5G incubator in New York City’s “Silicon Alley” and announced that trials were beginning with an initial wave of six innovative startups and two academic partners. These include pioneers of augmented reality (AR) and multi-user virtual reality (VR) along with platform startups working to analyze and optimize video delivery.
The new T-Mobile will spend about $40 billion over 3 years on network integration, expansion and new 5G construction, executives said as they outlined the Sprint merger on Sunday. This will create thousands of new jobs, particularly construction in rural communities, the companies said. Over the past three years, Sprint and T-Mobile spent $31.4 billion on capital expenditures.
Sprint has struggled with debt, and has sold bonds on the junk market. While there have been improvements in areas such as subscriber numbers, the company has booked an entire decade of losses. After cutting network spending for two years, Sprint is lagging behind its rivals on service quality in most areas of the country.
“We are going to have an impact on America. Rivals such as Verizon, AT&T and Comcast, which has begun offering wireless service, will have to respond. We are going to drag the rest of the players kicking and screaming to the prize, which is American leadership” in fifth-generation wireless networks.”
— John Legere, T-Mobile CEO
Ed Chan predicted that when 5G is combined with mobile edge computing, it will be a game changer for customers and the technology space – creating a wide range of innovations, from AR/VR applications for consumers to industrial automation opportunities. Mobile Edge Computing (MEC)
What is MEC?
Relevance of cloud computing to mobile networks is on an upward spiral. Social network services like Facebook and Twitter, the content from YouTube and Netflix, and navigation tools from Google Maps are all on clouds. Besides, users’ increasing reliance on mobile devices to carry out compute and storage intensive operations, whether personal or business related, require offloading to the clouds for achieving better performance extending battery life. These objectives would be difficult and expensive to realize without bringing the cloud closer to the edge of the network and to the users. In response to this requirement the mobile operators are working on Mobile Edge Computing (MEC) in which the computing, storage and networking resources are integrated with the base station. Compute intensive and latency sensitive applications like augmented reality and image processing can be hosted at the edge of the network.
Chan looked back a few years, reminding the audience that few people could envision apps like Uber, Snapchat and Instagram when Verizon first brought 4G to the marketplace. Chan said operators and technology leaders need to lean in and work together to build the next-generation networks now, so innovation can happen tomorrow. “5G will only be limited by our imagination.” Legere said basically the same thing on Monday morning on CNBC.
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