The CEOs of mobile wireless service providers T-Mobile and Sprint announced on Sunday their intentions to merge the two companies, a move that would boost the status of T-Mobile as the third-largest mobile provider in the United States, while eliminating Sprint as a competitor.
With all of the national attention focusing on T-Mobile, it can be easy to forget that the company’s U.S. headquarters is located only a short drive away from downtown Bellevue, just off Interstate 90 in Factoria, and that in addition to being major national news, this story is a local one as well.
So, what does this potential mega-merger mean for residents in Bellevue and the rest of the Eastside?
The $26 billion purchase would bring Sprint into T-Mobile and result in the creation of a $146 billion company. Stocks would be merged, with one T-Mobile share being worth around 10 Sprint shares.
Deutsche Telekom, which owns T-Mobile, would own 42 percent of holdings, followed by 27 percent being held by Sprint’s parent company, SoftBank Group. The remaining holdings are publicly traded. The company would be governed by a 14-person board of directors with Deutsche Telekom filling nine of these seats, SoftBank Group filling four and the last seat being filled by T-Mobile CEO, John Legere. If the merger is approved by the Federal Communications Commission (FCC), service for T-Mobile and Sprint, as well as the companies’ smaller subsidiary carriers MetroPCS, Boost Mobile and Virgin Mobile, would all be moved to the same network.
Legere said in a video released Sunday that he hopes to have plans for the merger submitted to the FCC in 2019, but it is uncertain if the deal will be approved by the FCC. Sprint has tried and failed to buy T-Mobile twice in the last four years.
If it is successful, the new T-Mobile would have more than 135 million subscribers, just under AT&T’s 141 million and the 150 million who subscribe to Verizon Wireless, according to Fierce Wireless numbers from the last quarter of 2017.
It is unclear exactly how this will affect customers, but the Washington Post reported that analysts expect prices to rise. In a series of press releases, videos and a phone conference, Legere touted the merge as one which will create greater competition, leading to lower prices.
Of greater interest to Eastside residents is how this will impact local jobs. This also is unclear. In total, T-Mobile employed about 51,000 workers at the end of 2017, with the Seattle Times pegging the number of workers in Bellevue at around 5,500.
The new company will continue to have a headquarters in Bellevue, but it will add a second home base — an HQ2 if you will — in Overland Park, Kansas, where Sprint is currently located. One of the press releases announcing the merger stated that, while the companies believed that the merger would ultimately lead to more jobs, around $6 billion in “synergies” would be reclaimed in the merger. This is generally a polite way of saying that operational redundancies will be eliminated through job cuts and a streamlining of the supply chain.
The Kansas City Star reported that Sprint is in the middle of layoffs at its 6,000-employee headquarters in Overland Park. Some 500 jobs will be cut this spring at the campus, which was built to house more than 14,000 employees. The Puget Sound Business Journal reported that Sprint tried to operate dual headquarters after it acquired Nextel in 2004, but shuttered its Virginia campus three years later and moved all operations to Kansas.
While T-Mobile has not said where such cuts might occur, Seattle-based mobile consultant Chetan Sharma told the Reporter that he expects to see a net decline in jobs at the new Kansas headquarters, coupled with an increase in Bellevue jobs. In the short term, Sharma said he expects to see jobs added company-wide as T-Mobile begins building its 5G infrastructure nationwide.
The development of 5G capability is a major selling point for the merger. Legere stated that the new T-Mobile would wield enough capital and economies of scale to place the United States in the lead in the race to implement the new technology.
It is expected that 5G will be the successor to current 4G mobile networks and will provide much faster connectivity, which will be required by a number of devices in coming years. ZDnet reported that these include fixed wireless infrastructure in cities with gigabyte per second speeds as microwave relay antennas are built. The Internet of things needs speedy and reliable connections, especially for self-driving vehicles which, require speeds of one millisecond or less. 5G could also allow media content platforms like Netflix and Amazon to compete against traditional cable providers.
More mergers and acquisitions are likely in the cards for the mobile marketplace, Sharma said, as companies turn to 5G to “reinvigorate the ecosystem” at a time when wireless service revenues have been under pressure. Market Realist wrote in January that service revenue for three of the four main providers was lower in the third quarter of 2017, year-over-year, when compared to 2016. The exception was T-Mobile, which grew by around nine percent.
News of the merger follows plans, announced earlier this year, to remodel five of the buildings at the company’s headquarters if an application filed with the city of Bellevue is approved.
In a design narrative provided by city staff, the remodel would improve the “arrival experience” of the campus, create social hubs, a connected campus and outdoor areas. Upgrades would include renovated interior spaces, skyways, game rooms, open air decks and a food truck court.
This comes as the owners of the Factoria Mall across the street from the headquarters have submitted an application to redevelop the mall and create hundreds of housing units. If approved by the city, the new Marketplace Apartments at Factoria would create 685 housing units and tack on 151,000-square-feet to the existing 526,000-square-foot mall. All this to say that Factoria could be even more difficult to drive through during construction, if development is approved.
Bellevue spokesperson Lenka Wright said the city was pleased to hear that T Mobile would stay in the city.
“We’ve been a good home to T-Mobile for its headquarters,” Wright wrote in an email. “Plus Bellevue’s the city where you want to be: we have the tech talent, innovative business climate, great schools and high quality of life that’s attractive to both employers and employees.”