Softbank Corp., an apparently deep-pocketed Japanese telecommunications company, has reached a deal to buy 70 percent of U.S. mobile carrier Sprint Nextel. At first blush, the announcement may look like a win for consumers. Look closer, though, and the long-term impact could be less rosy for wireless customers.
On the positive side, the deal may help preserve competition among four sizable, financially healthy wireless carriers, which has been anything but assured recently. After all, Verizon and AT&T together command a huge (and growing) share of the wireless market in the U.S. The two other major carriers—T-Mobile and Sprint—have struggled to compete.
That struggle was part of what recently propelled T-Mobile to acquire MetroPCS, a smaller carrier that focuses on providing high-speed 4G service in a number of cities. While the deal may not be perfect for consumers, it does promise to boost T-Mobile's competitiveness.
By injecting capital into Sprint, SoftBank might be able to assist the carrier to build out its networks (in particular, its high-speed 4G network). And Sprint may also be able to acquire the additional wireless spectrum that would allow it to make the most of that new technology.
However, there's concern from some quarters about where the networks and that spectrum might come from. As the T-Mobile acquisition of MetroPCS and AT&T's aborted acquisition of T-Mobile last year illustrate, larger carriers often expand by swallowing up smaller ones. And there's already speculation that a strengthened Sprint could go on to buy the likes of Clearwire, which provides wireless data service.
Such acquisitions can shrink the total number of choices available to wireless consumers—and also take away some spunky market innovators. MetroPCS, for example, built out a high-speed 4G network in a number of cities before some of the major carriers had done so.
The costs and benefits of this deal to consumers, then, are at best unclear at the moment. Also uncertain is whether SoftBank will receive the needed regulatory approval to complete the purchase.
In addition to its customary review of whether the merger is in the public interest, the Federal Communications Commission will also have to sign off on having a foreign company acquire a U.S. wireless carrier. While the FCC is allowed to approve such an arrangement, that component is bound to draw a good deal of political attention.