T-Mobile & Sprint: Merger (2018-Present)

Ethics Case Controversy

T-Mobile & Sprint logos (Credit: eweek.com)

On the 29^th of April 2018, T-Mobile and Sprint jointly announced a merger between the two companies. The two companies would join to be known as T-Mobile. The main reason for the merger is to be the pioneer of the nationwide 5G network. T-Mobile’s press release claimed that “Only the combined company will have the network capacity required to quickly create a broad and deep 5G nationwide network” (T-Mobile US, Inc). T-Mobile envisions not only being a part of the cell phone carrier industry, but also having an impact in industries like home internet and video streaming (The Associated Press).

Nationwide coverage of the 5G network and through other industries are not the only benefits T-Mobile announced. Prices will decrease, competition will increase, and quality of service will improve. John Legere, the CEO of T-Mobile promoted that following the merger, plan rates will not increase for at least three years (McLaughlin & Harris, 2019). T-Mobile claims that once the merger is complete 200,000 employees will work for the company. T-Mobile will invest $40 billion into its network and will help establish new jobs (T-Mobile US, Inc).

There have been several public interest groups that voiced their concerns about the potential merger. The senior vice president of Public Knowledge, Harold Feld, believes that once the two competitors merge, there will no longer incentive to cut prices to compete (Keneally, 2018). Multiple state attorney generals have spoken about the potential harm from this takeover. Maryland’s Attorney General, Brian Frosh, also expressed that the removal of one of the major carriers would be “dangerous for competition. That’s dangerous for consumers” (McLaughlin & Harris). The Federal Communications Commission and Department of Justice are required to review the deal before it can move forward. As of March 8, 2019, the FCC paused the 180-day review of the deal to analyze new information from T-Mobile (Shields & McLaughlin, 2019).

Stakeholders

Apart of the T-Mobile and Sprint merger, there are several stakeholders. T-Mobile, Sprint, Deutsche Telekom, and SoftBank Group are the primary stakeholders. This also includes employees and franchise owners. Stockholders of either the T-Mobile or Sprint Corporation stocks in the United
States will have their portfolio changed. Subscribers of T-Mobile and Sprint will now be placed under one company. AT&T and Verizon subscribers may be impacted through the price changes. Agencies such as the FCC and DOJ are required to review this case and make a final decision.

T-Mobile CEO John Legere and Sprint's Execute Chairman Marcelo Claure (Credit: apimages.com)

Individualism

Milton Friedman stated that the main responsibility of businesses is to maximize profits within the applicable laws. Any other use of the business’ money or profits is stealing from its owners (Salazar, pp. 17-18). An individualist views the T-Mobile merger as a permissible situation because it follows the values and ethics of individualism. Maximizing profits can be attributed from the increase enterprise value of the combined company following the merger. This can also be assumed from controlling the two national carriers who target the price-sensitive market. Instead of the segment being split between the two, one company will now control it. Being within the law may be another concern for an individualist. This concern may arrive from seeing the reduction of national carriers from four to three. This could cause a possible oligopoly. However, since there are other cases where an oligopoly may exist such as cable providers, this falls within the law. The profits from the business are the owner’s and they are the sole decision-makers of how it should be spent. T-Mobile and Sprint stated that this deal was approved by the Boards of Directors from each company. Each Boards of Directors contains members of each carrier’s parent company (Deutsche Telekom and SoftBank Group). In this case, an individualist sees this as being ethically responsible under individualism.

Utilitarianism

The T-Mobile and Sprint merger is viewed as unethical to a utilitarian because of the long-term effects of this deal. These effects include the loss of jobs and increased costs for consumers. Utilitarianism weighs the costs and benefits of a situation or action. T-Mobile proposed that opening new stores will create “thousands of new jobs” as well as employ 200,000 at the start (T-Mobile US, Inc). In several locations, both Sprint and T-Mobile have retail locations in proximity to another and could lead to redundant stores being in business. T-Mobile may cease doing business in these locations and focus on opening brand-new locations. The employees will be forced to find another job or be moved to another location. Costs for wireless service were not thoroughly discussed. The removal of Sprint from the economy removes the incentive to compete for price. While AT&T and Verizon may charge consumers more compared to T-Mobile, they no longer possess the motivation to create the “best” value. T-Mobile benefits from this through increased revenue while the consumers are forced with spending more for wireless service. This does not maximize the happiness of the employees or franchise owners.

Kantianism

A Kantian analyzing the T-Mobile situation views the action as impermissible. Kantianism involves an individual being concerned with the independent decision-making of others, honesty, and with treating “all people as ends and never only as means” (Salazar, p. 20) (DesJardins, p. 38). The merger is impermissible because of the partial transparency in the press release. This can be assumed that T-Mobile is not fully being honest with its customers. T-Mobile and Sprint provided a layout of the largest parts of the deal. This included lower costs, larger scalability, and investing. However, there was an absence of information on lower costs. The concern with costs could be considered a grey area for consumers. Consumers can still make a rational decision based on the information provided whether to stay with their carrier or switch. Treating consumers “as a mean” is another concern as they have little say in the matter. If the deal proceeds, consumers may be forced to change phones or service plans as Sprint devices may not be compatible on the T-Mobile network. This is a way for T-Mobile to earn more money from increased prices or device sales. There is little information of how the transition may work for current Sprint customers. Based on this information, a Kantian will view this as unethical and impermissible.

Virtue Theory

T-Mobile retail location (Credit: Jonathan Weiss / Shutterstock.com)

An individual analyzing this situation based on virtue theory will find this unethical. Virtue theory’s concern is the wellness of individuals through positive rather than negative traits (vices) and with the attributes of someone instead of an action or situation (Salazar, pp. 22-23). There are four main virtues that apply to this case: honesty, trust, greed, and justice. T-Mobile described to the public about what its plans are for the merger. These highlighted the benefits of what consumers and shareholders want to see. However, the announcement did not include the negatives of the deal. T-Mobile claimed competition will heat up and introduce lower prices for consumers, but it did not state the specifics. With one less carrier in the United States, T-Mobile no longer has competition to beat on price. This can be inferred as being deceitful to consumers. Trust was impacted by not being clear and specific about this, causing consumers to “fear of unknown” regarding this situation. As this deal is still under review, consumers and employees can’t predict what will occur to their service and jobs. Greed and the violation of justice can both occur by T-Mobile raising its rates to be closer to its competitors. It may be in violation of justice, specifically being a fair practice. This could be considered an oligopoly as three carriers have the market share allows them to charge consumers a higher price.

Justified Ethics Evaluation

Analyzing this case through the theories prior to the announcement would have determined the potential concerns that stakeholders may have. The benefits promised by T-Mobile may not be followed that should benefit all parties. T-Mobile has been successful in the past with the “Un-carrier” movement but past success does not ensure future success. A previous merger attempt failed in 2011 between AT&T and T-Mobile. The Justice Department declined it to prevent fewer choices for consumers and higher prices (Wyatt, 2011). I believe this is a cause for concern with this merger and predict that this will fail. If this merger is approved, I believe that an oligopoly will form. This allows all three carriers to charge similar prices now that there is little competition. Overall, T-Mobile and Sprint need to recognize these issues instead of focusing on just profit. T-Mobile needs to be honest with consumers and give exact details of how they will be impacted following this deal. Once this is accomplished, I believe consumers will be more informed and have more trust. This will improve the overall situation for this controversy.

Company Action Plan

T-Mobile needs to address the problems that several parties are facing due to the merger. One of the main concerns of this controversy is the impact on service prices for T-Mobile. Another concern for this controversy is the job loss for each company. These issues can be resolved by, keeping promises, reducing concerns, hiring knowledgeable workers, and monitoring ethics. These will ensure that T-Mobile rebuilds its relationships with all stakeholders.

T-Mobile needs to address what will happen to service plans for current T-Mobile customers and Sprint subscribers. The job loss concern for employees should be recognized. If there is a drastic impact, T-Mobile needs to step in and help employees find a new job or retrain. Knowledgeable workers need to be hired to produce a high quality and reliable network. A board or third-party should also be established to review these changes and announcements prior to being released. This plan for the “new” T-Mobile addresses the primary concerns of consumers and attacks the issues head-on. It addresses the issue and provides a resolution for each of the problems. This will lead to improving customer relationships and dedicated employees. This plan will help T-Mobile continue its success as a major wireless carrier in the United States.

Michael Middleton

References

DesJardins, J. (2014). An Introduction to Business Ethics (5th ed.). New York, New York, United States of America: McGraw-Hill/Irwin. Retrieved March 20, 2019

Drew, R. (2018). APTOPIX SPRINT T MOBILE DEAL. New York, New York, United States of America. Retrieved April 1, 2019, from http://www.apimages.com/metadata/Index/APTOPIX-Sprint-T-Mobile-Deal/c6976ce86f7f4cb99f45652f3352932a/34/0

Keneally, M. (2018, April 30). How the T-Mobile and Sprint merger could impact consumers. Retrieved March 11, 2019, from ABC News: https://abcnews.go.com/Business/mobile-sprint-merger-impact-consumers/story?id=54826385

McLaughlin, D., & Harris, A. (2019, March 6). T-Mobile's Sprint deal draws state concerns over consumer harm. Retrieved March 11, 2019, from Bloomberg: https://www.bloomberg.com/news/articles/2019-03-06/t-mobile-s-sprint-deal-draws-state-concerns-over-consumer-harm

Rash, W. (2018, November 17). T-Mobile-Sprint merger clock to resume Dec. 4. Retrieved April 1, 2019, from eWeek: https://www.eweek.com/networking/t-mobile-sprint-merger-clock-to-resume-dec.-4

Salazar, H. (n.d.). Chapter 2: The Many Faces of Ethics in the Workplace. In The Business Ethics Case Manual: The Authoritative Step-by-Step Guide to Understanding and Improving the Ethics of Any Business (pp. 15-24). Retrieved March 11, 2019

Shields, T., & McLaughlin, D. (2019, March 8). U.S. pauses T-Mobile-Sprint review in sign of fresh turmoil. Retrieved March 11, 2019, from Bloomberg: https://www.bloomberg.com/news/articles/2019-03-07/fcc-pauses-review-of-t-mobile-26-5-billion-bid-for-rival-sprint

The Associated Press. (2019, February 13). T-Mobile, Sprint execs defend $26.5 billion deal to lawmakers. Retrieved March 11, 2019, from CBS News: https://www.cbsnews.com/news/sprint-t-mobile-merger-execs-defend-26-5-billion-deal-to-lawmakers/

T-Mobile US, Inc. (2018, April 29). T-Mobile and Sprint to Combine, Accelerating 5G Innovation & Increasing Competition. Retrieved March 11, 2019, from T-Mobile Newsroom: https://www.t-mobile.com/news/5gforall

Weiss, J. (2017). Indianapolis - Circa February 2017: T-Mobile Retail Wireless Store. Indianapolis, Indiana, United States of America. Retrieved April 1, 2019, from https://www.shutterstock.com/image-photo/indianapolis-circa-february-2017-tmobile-retail-579439183?src=eoqRYdcAJ-ubReONunc-8g-1-9

Wyatt, E. (2011, August 31). U.S. moves to block merger between AT&T and T-Mobile. Retrieved March 11, 2019, from The New York Times: https://www.nytimes.com/2011/09/01/technology/us-moves-to-block-merger-between-att-and-t-mobile.html