What The Proposed T-Mobile-Sprint Merger Means For CRE

After years of on-again, off-again negotiations, T-Mobile and Sprint finally agreed last April to tie the knot, marking one of the largest proposed telecom mergers of all time.

If the deal goes through, the two companies will officially join under the T-Mobile name. Though FCC Chairman Ajit Pai has signed off on the merger, it still needs approval from the U.S. Department of Justice, which could be which seems to be a foregone conclusion.

Americans’ feelings about the deal are mixed. Some are opposed to the growing consolidation of the mobile industry. Others fear the end of Sprint and its low-cost plans that have long acted as a check on Verizon and AT&T’s prices. Proponents of the merger, including T-Mobile CEO John Legere, argue that together, the two companies hold a much stronger market position to compete against the two current market leaders.

Commercial real estate professionals may be most concerned with the cost of their personal phone plans, but they also need to be concerned about the future of their buildings. As owners prepare for the transition to 5G, the merger could be a double-edged sword.

“It should simplify some of the in-building cellular problems by eliminating one of the carriers, but it may cause 5G headaches sooner than a lot of building owners are prepared for,” said John Meko, director of engineering in North America for WiredScore. 

Dead Spots

The majority of mobile traffic originates indoors. But even as occupants require more bandwidth, commercial buildings are increasingly blocking wireless signal with their energy-efficient materials. To address the deficiencies in their indoor cellular coverage, owners have installed in-building mobile solutions, like Distributed Antenna Systems and small cells.

These systems can be expensive, and without the right guidance, they can also be a logistical headache. Building owners have to negotiate independently with each of the major carriers to attach its signal source to the system. And in practice, getting all four carriers to link up their networks was a bit of a pipe dream.

“As tenants shifted to bring-your-own-device policies, it fell to building owners to ensure there was sufficient coverage for all four providers,” Meko said. “Unfortunately, that was sort of a ‘unicorn’ scenario. Over the past several years, Sprint rarely invested in supplying signal to buildings for a DAS.”

The T-Mobile-Sprint merger would make installing a DAS simpler by eliminating one major carrier, Meko said. Further, economies of scale created by the merger could inspire the new T-Mobile to invest more in mobile solutions for commercial buildings.

Working To 5G

Part of the reason the T-Mobile-Sprint merger glided through FCC approval was because the combined companies have pledged to accelerate the rollout of 5G networks in the U.S. Industry estimates have pegged the cost to roll out a 5G network at $200B, so T-Mobile and Sprint have little chance of affording a nationwide rollout as two separate entities. 

"Adding Sprint's mid-band spectrum to T-Mobile’s toolkit gives them a clear cut path to a nationwide 5G network," Meko said. “The combined companies stand a much better chance of surviving the 5G arms race. And for consumers, three providers with successful 5G rollouts is surely better than two.”

Having a second competitor on their level could provide an impetus for Verizon and AT&T to invest more in their own 5G rollouts. As the timeline to 5G gets compressed, the need to prepare for 5G becomes more urgent for office owners and developers.

5G service will also be more difficult to bring indoors than 4G. Meko explained that 5G operates on different frequencies than 4G frequencies, and 5G signals are more degraded by construction materials like concrete and the low-emissivity glass used in green building design.

The Return Of The Corporate Phone Plan

Currently, Verizon and AT&T each have more than four times the number of corporate and government phone plans than T-Mobile and Sprint combined. The merger raises the possibility that the new T-Mobile could undercut the market for corporate phone plans by offering a cheaper alternative.

New corporate businesses could be spurred on by a shift away from bring-your-own-device policies. As larger companies begin to take data breaches more seriously, they may begin issuing more company-owned devices that they can secure.

“Building owners need to prepare for a world in which in-building wireless for three carriers is the norm,” Meko said. 

Consumers Paying The Price

Many of the merger’s opponents contest that eliminating Sprint will only increase the cost of monthly mobile bills and bring Americans back to the two-year, data-capped phone plans of years past.

These opponents point to Canada’s mobile market as a cautionary tale. With only three major carriers to choose from, Canadians pay some of the highest prices for cellular service anywhere in the world.

The Canadian Radio-television and Telecommunications Commission — Canada's equivalent of the FCC — recently demanded that carriers come up with lower-cost alternatives. All three returned with plans costing $30 per month for 500 megabytes of data. 500 megabytes will let a user stream approximately a single full-length movie. 

However, Meko said, those fears may not materialize in the U.S. T-Mobile had said it would not increase prices for three years and will offer 5G services at no additional charge.

“Industrywide, the cost for wireless services decreased approximately 19% from 2012 to 2017,” Meko said. “John Legere, who plans to stay on as CEO of the combined companies, wants to overtake AT&T and Verizon at all costs.”

This feature was produced in collaboration between Bisnow Branded Content and WiredScore. Bisnow news staff was not involved in the production of this content.