Sprint is a storied American brand, but it’s one that could cease to exist if its $26 billion merger with T-Mobile is approved.
“I want to acknowledge the Sprint history and its 120-year legacy that is now part of our legacy as we launch into this new era,” said T-Mobile CEO Mike Sievert in a statement, adding, “We did it! Another historic day for new T-Mobile!”
The long-awaited merger means the end of Sprint’s long corporate history, but it also puts a capstone on several bruising decades of failed bets and teetering on the brink of bankruptcy.
Though it remains the fourth-largest wireless provider in the country, Sprint’s missteps have put it well behind larger rivals Verizon (VZ) and AT&T (T) (CNN’s parent company) in terms of customer numbers and network performance, and as the costly rollout of 5G looms large. Many think that without T-Mobile (TMUS), Sprint may struggle to stay afloat and will probably find itself in bankruptcy court, something even Sprint has begun to hint at.
The Slow Decline
Sprint was born out of the thousands of miles of telegraph wire that ran along the Southern Pacific Railroad’s tracks to facilitate train dispatches. The name “Sprint” was an acronym for the system: Southern Pacific Railroad Internal Networking Telecommunications. In the 1970s, the group opened up access to the long-distance calling network for private customers.
Two decades later, the Sprint Corporation became its own company and entered the wireless business with the 1992 acquisition of Centel, making it the country’s only provider of wireless, long distance and local calling. The following years were relatively successful for Sprint, perhaps helped by its famous “pin drop” commercials starring “Murphy Brown’s” Candace Bergen touting the performance of the network.
In 2004, Sprint merged with Nextel in a bid to dramatically grow its wireless customer base and — sound familiar? — better compete with Verizon and AT&T. But that deal was an abject failure, and all of Sprint’s success came crashing down.
The Nextel deal had several issues, including incompatible technologies: Nextel phones didn’t work on Sprint’s network, and vice versa. That meant the merged company couldn’t reap the benefits of their combined infrastructure. Customers fled Nextel and didn’t necessarily join Sprint. Sprint eventually wrote down nearly all of the merger’s value and shut down Nextel’s network in 2013.
The failed merger left Sprint’s balance sheet depleted, so it didn’t have the same kind of cash to invest in improvements to its network as competitors.
Still, a below-average network used to be enough to draw in customers, because Sprint was willing to charge below-average prices. As time went on, though, that became a less appealing offer. These days, people need their phones for everything from banking to paying for the subway, so low prices matter less than having a network that works everywhere, all the time.
“Sprint used the comical tagline: We’re almost as good for less money,” Moffett said. “And almost as good is, for obvious reasons, not a terribly compelling value proposition.”
Moffett says the company has lost money on many of the customers it drew in with steep promotions — they would choose Sprint over competitors when it offered them discounted service, but when it raised their rates to a price that was sustainable for the business, they would switch carriers.
In the first six months of its fiscal 2019, Sprint posted net losses in the hundreds of millions of dollars. It also lost tens of thousands of postpaid subscribers, who are the customers most likely to pay their monthly bills and least likely to switch carriers.
Counting on a merger
Whether or not Sprint will have to face that uncertain future will probably be decided when the states’ suit to block the merger goes to trial, which is expected to begin next month.
But combining Sprint and T-Mobile won’t be easy. They use different network bands and technologies – something T-Mobile is familiar with, after it merged with MetroPCS in 2012. That could take some time to integrate.
Although Sprint is dead, T-Mobile is in a celebratory mood.
“This is so much more than just rebranding thousands of Sprint locations with a fresh coat of magenta paint,” Sievert said. “This is about giving customers even more access to our expanded retail footprint … and reap the benefits from all that new T-Mobile has to offer!”