The Incredible, Inevitable Number Three

Is a Sprint–T-Mobile Combo Written in the Stars?


It’s time for US mobile market players to mentally prepare for a different set of dynamics — for an “un-carrier” to be third-placed.

The economic rule of three is a strong undercurrent affecting any competitive landscape, whether looking at game consoles (PlayStation, Xbox, Wii), browsers (Chrome, Internet Explorer, Firefox) or the US car market (GM, Ford, Chrysler). In most mature markets, competitors grow and combine over time until three mainstream companies are left standing.

Sprint’s subscriber numbers would be much closer to those of Verizon and AT&T should the potential bid for T-Mobile USA be successful. Sprint and T-Mobile have a combined total of about 100 million subscribers in the US, compared with Verizon’s 122 million and AT&T’s 115 million. This would suggest a levelled three-way market, in which any competitor would have the resources to match the others, move for move. This will be used as a core argument by supporters of the deal.

However, combining the third- and fourth-largest American wireless carriers wouldn’t be a straightforward or painless process. The two have an assortment of spectrum, brands and stores, have historically used different air interface technologies and have rather different corporate personalities. T-Mobile’s Un-carrier strategy under CEO John Legere contrasts with the outwardly calm demeanour of Sprint under CEO Dan Hesse. However, both executives know the market is changing in ways greater than either could handle independently. Service providers across the US are offering quad-play services and preparing to enter adjacent markets, and Sprint will need to scale up to keep up.

The rule of three is a market observation, not a law of physics — there are no certainties, just trends. The market is evolving, and cellular access is just one part of a general service package. CCS Insight believes that Sprint and T-Mobile will shuffle pieces around and divest assets in a bid to convince regulators of the merits of the deal, and we’d be surprised if we didn’t see further consolidation of telecom providers in the US.