If Sprint and T-Mobile gain approval from regulators in their year-long quest to merge, some infrastructure vendors could be in for a rude awakening. “Operator mergers are never a good thing for the infrastructure vendors, and this will be no different,” noted Chris Nicoll, principal analyst at ACG Research.
“The overall network consolidation will result in less capex and opex spend to be had, but there will be winners alongside the ‘losers’ in the spending shift,” he wrote in response to questions. Spending on small cells and the vendors that supply them will see the most immediate upside, Nicoll explained.
With Huawei effectively out of the running, Ericsson, Nokia, and Samsung will be competing aggressively for equipment contracts as the combined operator builds out its 5G network. And Samsung is most likely to draw the short straw in that battle, according to Daryl Schoolar, principal analyst at Ovum.
“Ericsson and Nokia are going to be fine because they’re good partners of both companies. The question is what happens to Samsung. We know that they are involved in building out [Sprint’s 2.5 GHz] network, but other than that we don’t know that they stay there,” he said.
There might be something about Samsung that just doesn’t appeal to T-Mobile, Schoolar said. When T-Mobile acquired Metro PCS, it opted to tear out Samsung’s LTE equipment and replace it with gear from other vendors, he said. However, because the Sprint network is so much bigger than Metro PCS’ (now Metro by T-Mobile) footprint, it would be much more expensive to completely rip out Samsung’s equipment again.
It’s not unusual for nationwide operators in a country the size of the United States to work with all three vendors, Schoolar explained. “You have that with AT&T and Verizon. They work to some degree with all three.” If Samsung is left out of future network buildout plans, Sprint’s capex could end up being divided by Ericsson and Nokia, he added.
If the merger is approved, Nicoll anticipates a different outcome. “Samsung and Nokia are net winners here, along with Airspan and possibly Kathrein and CommScope,” he wrote. “Ericsson may see some decrease in the short-term, but when the 5G core finally goes commercial and RAN (radio access network) deployments expand, they will see business pick up.”
Virtualization Efforts
What impact, if any, the potential merger will have on network virtualization efforts is tough to decipher. “What is holding back virtualization is not a lack of opportunity — it is a lack of maturity of telco-grade software solutions,” Nicoll wrote. “Virtualization will happen, but slowly and in a more measure approach. Sprint and T-Mobile need the merger to result in flawless network operation and that is not what virtualized solutions deliver today.”
T-Mobile and Sprint haven’t been as forthright about their network virtualization plans as AT&T and Verizon, and much of that probably comes down to timing. “It really depends on how they integrate the networks and how long that takes,” Schoolar said.
The combined company will have to deal with other issues before software plays a bigger role. Having multiple radio vendors within the same metropolitan area “could cause a problem,” for example, Schoolar explained. “You tend not to want to have that type of mix… They have to work through that before the software. I imagine there will be a strategy to do some stuff with software and convert as they do that at the same time.”
5G Impact
But bringing the two networks together, combining back office operations and other core processes will take a while, Schoolar said. The operators are also starting to build out their respective 5G networks and will have to rationalize those plans under a single framework going forward.
“In terms of getting the access network out there, yes, this could probably speed it up because you’re going to have a low- and mid-band [network], and both operators are in the process of doing this,” Schoolar said. Still, making sure that both networks are totally interoperable will be a challenge.
Nicoll doesn’t expect the merger to have any direct impact on the timing of 5G deployments. “5G deployments are moving at the speed of 5G solution maturity,” he wrote. “5G RAN is available, but the non-radio aspects are further behind.”
Finally, as for which way the much-debated merger of Sprint and T-Mobile goes, Schoolar predicts the Department of Justice will sign off on the deal, but require more concessions. “I think they’ll end up getting approval, but I would think they’re going to have to give up something…some more concessions, some more spectrum.”