If Sprint Corporation and T-Mobile USA, Inc. combined forces, a dramatic increase in scale and an opportunity for considerable cost savings could abound, according to a new report by Moody’s Investors Service.

“A merger between Sprint and T-Mobile USA could ultimately extract $3 billion or more in annual run-rate synergies from operational expense savings,” says Moody’s SVP Mark Stodden. “But integration could take three to five years to achieve, and if it stalls or is derailed by operational missteps, the downside is catastrophic.”

In the length of time needed for implementation, competitors such as AT&T and Verizon Wireless will have an opportunity to upgrade their own strategies and gain market share. Additionally, due to the combined spectrum holdings among the two companies, T-Mobile could begin offering unlimited pricing, staying competitive within the industry, noted Moody’s press release posted Monday.

There are also regulations to contend with and concessions would have to be made for this type of transaction to pass. According to Moody’s, both Sprint and T-Mobile have a history of price disruption and would likely be willing to commit to regulations that adhere to continued price competition.

Regarding time to ramp up, T-Mobile could lose market share during this period, with AT&T and Verizon benefitting from the churn. Also, any challenges with T-Mobile’s service platform could offer Verizon and AT&T additional leverage to differentiate their services.

June 21, 2017