Justice department looking at Sprint/T-Mobile impact on MVNO market

Justice department looking at Sprint/T-Mobile impact on MVNO market

The US is examining the effect of a merger between Sprint and T-Mobile US on the wholesale mobile services market.

Reuters reported last night that the US Department of Justice (DoJ) is looking at how the $26 billion proposed merger will affect prices for mobile virtual network operators (MVNOs).

Both Sprint, owned by Japan’s SoftBank, and T-Mobile US, owned by Deutsche Telekom, are major wholesale providers of infrastructure and capacity in the US MVNO market. The DoJ has refused to comment on the report.

Under the deal, announced in April, Deutsche Telekom will become the largest shareholder in a combined US operation under the management of John Leger, current CEO of T-Mobile US. A combined company will be able to rival market leaders Verizon and AT&T in the US mobile business, they said.

But unlike AT&T and Verizon, both Sprint and T-Mobile have a substantial business in the MVNO business. Lists published last year by Android Central showed 26 MVNOs on the Sprint network and also 26 on T-Mobile US.

The lists include Virgin Mobile USA, which Sprint has owned 100% since 2009, and Walmart’s Family Mobile brand, which uses T-Mobile’s network. MVNOs tend to focus on prepay users, something AT&T and Verizon have avoided, and Reuters says a combined Sprint/T-Mobile would have 54% of the prepaid market in the US.

Both networks – plus smaller rival, US Cellular – provide coverage to Project Fi, Google’s plan to offer MVNO services.

The DoJ can be expected to examine all aspects of the proposed merger, including the potential effect on the MVNO business – so news of the DoJ enquiry is not an indication that the US government is taking a negative position.