Sprint T-Mobile Merger and What it Means for Kansas City
The FCC approved the Sprint T-Mobile merger in a 3-2 vote on November 5, 2019. As of February 11th, 2020, the two companies are working together on the final steps in the merger after receiving a favorable decision in a New York Federal District Court. It’s a deal that’s been looming large over the KC Metro the past several months, and the impact on Kansas City has yet to be thoroughly discussed. Let’s take a look at the merger, how it’s affecting Sprint, its employees, and Kansas City.
The Sprint T-Mobile Merger
In a party-line vote, the $26.5 billion merger received approval by the FCC. Two Republican commissioners, Brendan Carr and Michael O’Rielly, and the FCC Chairman Ajit Pai cast votes in favor of the merger. They believe that the Sprint T-Mobile merger would help generate a quicker rollout of 5G network technology to consumers. While Democratic Commissioner Jessica Rosenworcel, who voted no on the decision, believes that it would hinder competition stating, “With less competition, rates rise, and innovation falls.”
While it’s approved, the Sprint T-Mobile merger isn’t entirely out of the woods yet. There’s a pending FCC investigation into Sprint dealing with government subsidies that may delay things.
Sprint Subsidies Mishap
The other Democratic Commissioner, Geoffrey Starks, voted no on the deal referencing Sprint’s recent alleged subsidy scandal regarding Lifeline. Sprint is under fire for the alleged wrongful claiming of millions in federal subsidies from Lifeline. Lifeline is a program that helps low-income Americans with their phone and broadband costs that began during the Reagan administration. The allegation is that Sprint mishandled Lifeline subsidy funds concerning about 885,000 ineligible customers. Starks says, “There is no credible way that the merger before us can proceed until this Lifeline investigation is resolved and parties are held accountable.”
In an investor update from Sprint on November 4, 2019, the provider stated, “We are committed to reimbursing federal and state governments for any subsidy payments that were collected incorrectly.”
Sprint Losing Subscribers
From July 2019 through October 2019, Sprint lost 91,000 of its most essential subscribers, postpaid subscribers. These subscribers are the most valuable to carriers like Sprint and T-Mobile because they are more inclined to pay their monthly bills on time. Postpaid subscribers also mean more to carriers because they tend to stick with providers longer than prepaid subscribers.
The loss of subscribers is exacerbated by previous quarter losses of a net 128,000 postpaid customers and losses of around 34,000 postpaid subscribers in late 2018.
How Will the Sprint T-Mobile Merger Affect Kansas City?
According to the Kansas City Star, there are approximately 6,000 Sprint employees and 2,000 Sprint contractors at their Overland Park, Kansas headquarters, as of March 1, 2019. Sprint has about 28,500 employees overall according to first quarter 2019 data. So, with nearly a quarter of their workforce in Kansas City, it’s hard to imagine the Sprint T-Mobile merger not having an impact on the metro.
Usually, with mergers, job losses are expected. However, T-Mobile has said they plan to keep the Sprint campus open as a secondary headquarters. Even while they plan to maintain the Sprint campus, the moniker will be replaced with T-Mobile. Meaning one of Kansas City’s most recognizable corporate brands will no longer be.
T-Mobile Says They Will Keep the Overland Park Sprint Campus, but Will They?
While the reassurances of a maintained headquarters in the Kansas City metro are nice, they should be taken with a grain of salt. Why? Well, let’s use Sprint’s merger with Nextel as an example. In the 2005 Sprint Nextel merger, Sprint maintained corporate headquarters in Reston, Virginia, and operations headquarters resided in Overland Park. Fast forward to 2008, and the Reston campus was gone with the Overland Park campus remaining the single Sprint headquarters. Could Kansas City experience a similar move down the road from T-Mobile, whose HQ is in suburban Seattle? Uncertainty remains knowing that very few corporations retain two headquarters for very long.
What About Sprint Employees?
Sprint higher-ups know that their employees have gone through the wringer over the past decade. The company has shed around 15,000 jobs in less than ten years, all the while fighting to remain profitable. As the merger is slowly moving forward, Sprint says it is doing its best to retain employees. With the Kansas City unemployment rate of 3.1% as of December 2019, the risk of employees jumping ship during volatile times is even more noticeable. The Kansas City metro is currently enjoying an extremely competitive job market and an economic boom.
The carrier has enacted programs to ensure employee retention, such as guaranteed minimum cash bonuses for non-commissioned employees in 2019 and the potential for top performers to earn a trip to Hawaii. Both companies have maintained that the merger will not result in significant job losses. T-Mobile even doubled-down saying The New T-Mobile Will Create Jobs from Day One. Sprint, on the other hand, isn’t making any promises to its employees.
Another impact on Kansas City can be quantified by the potential job numbers T-Mobile has suggested. By 2024, T-Mobile says they plan to create 11,000 new jobs with 1,000 of them at a new customer service center at the Overland Park campus.
What if I work at Sprint today?
So, what if you’re an employee at Sprint? The Sprint T-Mobile merger presents some uncertainty to employees. With any uncertainty comes risk, and with risk comes potential opportunities and threats. If you’re a Sprint employee who wants to plan ahead and assess their potential risks, we’re happy to help! We can help you make decisions on your 401(k), assess the risks of losing your income, and how all of those factors can affect your overall plans to retire.
Planning for the unexpected is a vital part of any well-crafted retirement plan. And it just so happens, we specialize in planning for your retirement. If you have questions about your employment situation, fill out the form below, or give us a call at 913-393-1000. Our financial planners are here to listen and address your concerns by developing plans customized to your goals.
Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.
The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.