Why Sprint Wants To Buy T-Mobile: Scale

danhesse tbi

Sprint is reportedly in talks to acquire T-Mobile, its smaller rival in the wireless carrier industry.

The big idea is to generate more scale by combining the no. 3 and no. 4 players. Sprint has 50 million subscribers and T-Mobile has 34 million. Combined, that’s 84 million, almost as big as rivals AT&T and Verizon, which are above 90 million.

Scale matters for buying equipment, negotiating deals with suppliers, handset makers, sales, service, marketing, and basically everything involved in the wireless business. For instance, they’d have a much better opportunity to sell Apple’s iPhone this way.

So even though there would be a mess integrating Sprint and T-Mobile’s separate brands, customer bases, and wireless networks — something that was a DISASTER for Sprint’s last huge merger, with Nextel — it could work out in the end. (It ultimately worked out for Cingular and AT&T Wireless, for example.) Of course, it could also be a disaster, giving Verizon and AT&T even more of a lead.

There was a time when the big rumour was that Comcast was going to buy either Sprint or T-Mobile, but it would be trickier now that Comcast is digesting NBC. And anyway, Comcast doesn’t seem all that interested in wireless. It’s not like it’s doing much with its investment in Clearwire, the 4G carrier.

Read: Apple’s Amazing iPad Business In Context

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.