The editorial board of The New York Times has come out swinging against Sprint‘s (NYSE:S) speculated combination with T-Mobile (NYSE:TMUS). SoftBank (OTC:SFTBY), a Japanese wireless provider, owns a controlling interest in Sprint. Should an acquisition be approved by regulators, namely the Federal Communications Commission and the United States Department of Justice, the four largest national carriers would be reduced to the three largest national carriers and such a shrinkage, according to The Times would negatively impact consumers. Here is the crux of The Times’ argument about the impact on consumers:
“As an independent company, for instance, T-Mobile has recently cut prices aggressively and simplified its cellphone plans. Its phone plans are often much cheaper than comparable packages offered by other cellphone companies. It no longer forces customers into two-year contracts; its subscribers can switch to another wireless firm whenever they like. And it slashed the high international roaming charges it levies on calls customers make when they are traveling abroad and eliminated roaming charges for text messages and Internet service.”
To me, that is not a valid argument to base a rejection of a combination. T-Mobile’s decision to provide cheaper comparable packages resulted from its ability to identify a niche, an underserved market that could have been left out of the market for wireless broadband services. It would be bad business judgment for SoftBank to ignore this market especially since T-Mobile’s corner on the underserved market is one of the linchpins of the company’s success. SoftBank would still have to compete with AT&T and Verizon and extinguishing an important part of T-Mobile’s business model would be like bringing a knife to a gunfight.
The Times is wrong on this one.