US Should Approve Sprint, T-Mobile Merger To Beat Huawei, Win 5G War

It seems the expansive future of 5G in the United States rests in the hands of T-Mobile and Sprint.

That's because Sprint is sitting on a "phenomenal band of spectrum,” said analyst Jonathan Chaplin, head of the US communications services research team at New Street Research.

"What Sprint has is mid-band spectrum, which can work almost everywhere. It might not be great in the most rural parts of Montana but pretty much everywhere else it's going to work great," Chaplin told CNBC's "The Exchange" on Friday.

On the other hand, Verizon and AT&T have high-frequency spectra that work great in the big cities but not very well outside of dense markets, according to Chaplin.

President Donald Trump has said the U.S. must win the 5G race. South Korea on April 5 launched the world’s first 5G network along with the world’s first 5G smartphone. The U.S. now competes against China to be the first to deploy 5G.

Chaplin argues that if the U.S. wants to be the leader in 5G, the Trump administration should approve the merger between Sprint S-GB and T-Mobile TMUS.

The two wireless companies agreed to a $26.5 billion merger in 2018, but are still awaiting federal approval of the deal.

"If it is really important to the administration to be first in 5G and have a more robust set of infrastructure in the U.S. than China, Japan and Korea do, then they should let the deal go through," said Chaplin.

"That's the path to the best 5G network we're likely to see in the U.S. and it will drive AT&T T and Verizon VZ to invest."

A big reason for approving the merger is that Sprint doesn't have the money to deploy its spectrum band.

"If the deal with T-Mobile goes through, that's going to put those companies in a phenomenal position. If the deal doesn't go through, that spectrum just sits on the sidelines for the next five years."

T-Mobile and Sprint are the third and fourth largest mobile providers in the U.S. with a combined customer base of 130 million subscribers. The combined firm will be named “T-Mobile” and will be run by executives from Deutsche Telekom, owner of T-Mobile.

Under the deal, Deutsche Telekom will own 42 percent of the new company and control its board. Softbank, owner of Sprint, will hold a 27 percent stake. The new company is also referred to as the “New T-Mobile.”

It will have a market value of $146 billion and will be based in Bellevue, Washington, with a second headquarters in Overland Park, Kansas.

John Legere, current President and CEO of T-Mobile U.S. and the creator of T-Mobile’s successful Un-carrier strategy, will serve as CEO of the New T-Mobile. Mike Sievert, current Chief Operating Officer of T-Mobile, will serve as President and Chief Operating Officer of the combined company.

The remaining members of the new management team will be selected from both companies during the closing period.