T-Mobile is set to acquire Ka’ena Corporation, which owns various wireless companies, including Mint Mobile.[1] Although they are both players in the mobile network marketplace, T-Mobile and Mint Mobile are different kinds of players. Namely, in the U.S., T-Mobile is one of three Mobile Network Operators (“MNOs”) and Mint Mobile is one of dozens of Mobile Virtual Network Operators (“MVNOs”).[2] The principal difference is that MNOs own and service the infrastructure while MVNOs buy and resell network capacity from the MNO to their own customers.[3]
MVNOs Are Competition
This mobile marketplace paradigm complicates a competition analysis as the MNOs and MVNOs share the infrastructure but not (all) the profits.[4] To the consumer, MVNOs often appear as standalone options with brands and prices that are different from the three MNOs.[5] So are they competitors or collaborators? To the consumer a cheaper provider like Mint Mobile or Boost Mobile is an alternative, which should make them competitors.
Some, however, think otherwise.[6] At face value, MNOs and MVNOs offer a product that only differs in quality and cost.[7] Critics believe the lower-priority, cheaper MVNO cannot directly compete against the higher-priority, more expensive MNO.[8] Instead, critics suggest that the two companies collaborate.[9] In fact, the MVNO-MNO relationship can be viewed as one of collaboration: although the MNO “forfeits some of its own sales in a downstream retail market,” the MVNO adds value by widening the MNO’s reach.[10] However, considering that MVNOs can “siphon off customers from MNO networks” and that they specifically “fill an important void” left by MNOs in targeting specific communities, they should be considered competitors.[11]
Further support for this view comes from the MNOs themselves. Presently, why would T-Mobile have any interest—up to $1.3 billion dollars’ worth—in the award-winning Mint Mobile if it did not see it as a threat?[12] Relatedly, if viewing MVNOs as middlemen, why not cut them out and sell the service themselves? One explanation is to preemptively stop MVNOs from partnering with other services. For example, Charter Communications’ MVNO, Spectrum Mobile, bundles their internet and TV services with their MVNO mobile plan, which has caused MNO customers to jump ship to the MVNO.[13]
T-Mobile’s Merger with Mint Mobile
Unless such middlemen are required,[14] intuitively, the more profitable option for an MNO is to simply acquire the MNVO– precisely what T-Mobile has done with Mint Mobile. To effectively vertically integrate itself whereby one MNO owns the upstream (the high-paying MNO customers) and the downstream (the customers from MVNOs).[15] But what does this mean for competition? For comparison, consider how T-Mobile changed after acquiring one of its MNVOs, MetroPCS. Research suggests T-Mobile’s acquisition of MetroPCS opened the door to the MNO expanding its prepaid presence.[16] Granted, T-Mobile did not have the prepaid presence it does now, but there is nothing to suggest T-Mobile’s acquisition will have anti-competitive effects.
Conclusion
Evidently, there is no immediate red flag, which cynically re-raises the question of why T-Mobile is buying Mint Mobile? Ask either of the merging parties and we hear boilerplate language; “to help the brands to grow and offer competitive pricing and greater device inventory to more U.S. consumers seeking value offerings,” and “[T-Mobile is] excited to use our scale and owners’ economics to help supercharge it—and Ultra Mobile—into the future.”[17] As others speculate[18] as to why T-Mobile is doing this deal, it will be interesting to see how regulators treat this deal.
[1] See T‑Mobile to Acquire and Turbocharge Mint Mobile and Ultra Mobile, Brands Will Continue Delivering Value on the Un‑carrier’s 5G Network, T-Mobile (Mar. 15, 2023), https://www.t-mobile.com/news/business/t-mobile-to-acquire-mint-and-ultra-mobile.
[2] See Chris Holmes, Best T-Mobile MVNOs: Small Carriers on T-Mobile’s Network, WhistleOut (last updated Apr. 5, 2023), https://www.whistleout.com/CellPhones/Guides/t-mobile-mvnos.
[3] See Aniruddha Banerjee & Christian M. Dippon, Voluntary Relationships Among Mobile Network Operators and Mobile Virtual Network Operators: An Economic Explanation, Info. Econ. & Pol’y (Jan. 29, 2009), https://www.nera.com/content/dam/nera/publications/archive1/PUB_Voluntary_Relationships_IEP_Feb2009.pdf.
[4] See Stetson Doggett, What is an MVNO? Mobile Virtual Network Operations Explained, BestPhonePlans (last updated Dec. 16, 2020), https://www.bestphoneplans.net/news/mvnos-explained.
[5] Banerjee & Dippon, supra note 3.
[6] Id.
[7] See Doggett, supra note 4.
[8] See John Celentano, Are MVNOs a Threat to Their MNO Hosts?, Inside Towers (Jan. 11, 2022 5:58 AM), https://insidetowers.com/cell-tower-news-are-mvnos-a-threat-to-their-mno-hosts/.
[9] Banerjee & Dippon, supra note 3.
[10] Id.
[11] See Celentano, supra note 8.
[12] See Monica Alleven, T-Mobile’s Move for Mint Reignites Debate Over MNOs, Fierce Wireless (Mar. 16, 2023), https://www.fiercewireless.com/wireless/t-mobiles-move-mint-reignites-debate-over-role-mvnos; see also T-Mobile, supra note 1;; T-Mobile Reaches Agreement to Acquire Mint Mobile for up to $1.35 Billion, Mint Mobile, https://www.mintmobile.com/unicorn/ (last visited Apr. 10, 2023).
[13] See Celentano, supra note 8.
[14] See T-Mobile Closes Deal With DISH to Divest Sprint Prepaid Business, T-Mobile (Jul. 1, 2020), https://www.t-mobile.com/news/un-carrier/t-mobile-closes-deal-with-dish-to-divest-sprint-prepaid-business.
[15] See Adam Hayes, Vertical Integration Explained: How it Works, With Types and Examples, Investopedia (last updated Aug. 26, 2022), https://www.investopedia.com/terms/v/verticalintegration.asp.
[16] See Trefis Team, T-Mobile’s Solid Execution On MetroPCS Acquisition Bodes Well For Sprint Deal, Forbes (Oct. 28, 2019), https://www.forbes.com/sites/greatspeculations/2019/10/28/t-mobiles-solid-execution-on-metropcs-acquisition-bodes-well-for-sprint-deal/?sh=18304f5c2a80.
[17] See T-Mobile, supra note 1.
[18] See Emma Roth, T-Mobile is Buying Ryan Reynold’s Mint Mobile for up to $1.35 Billion, Verge (Mar. 15, 2023), https://www.theverge.com/2023/3/15/23641178/tmobile-mint-mobile-ryan-reynolds-wireless-acquisition (suggesting T-Mobile looks to benefit from Mint Mobile’s marketing strategy).
