Merger of T-Mobile and Sprint Could Reshuffle Millions of Square Feet of Office, Retail and Tower Space - Sachse Construction
Topics: Business, Construction, Headlines

Merger of T-Mobile and Sprint Could Reshuffle Millions of Square Feet of Office, Retail and Tower Space

The leaders of T-Mobile US and Sprint Corp. are likely to reshuffle their retail line-ups and cell tower networks while keeping headquarters operations in both Seattle and Kansas City should they win approval for a $26.5 billion merger announced Sunday.

The new company, to be called T-Mobile, would be headquartered in Bellevue, WA, with a second headquarters in Overland Park, KS, according to the companies.

This past February, T-Mobile extended its lease on its 900,000 square feet of headquarters space in Bellevue. It leases another 1.7 million square feet of office space across the country.

Even though T-Mobile is the larger of the two firms, Sprint leases almost twice as much office space – more than 3.8 million square feet in the Kansas City metropolitan area.

John Legere, current president and chief executive of T-Mobile U.S., would lead the combined company. In interviews and conference calls on the deal Sunday, he called the decision to maintain two headquarters a no brainer. The twin HQs would enhance the combined company’s ability to attract talent from across the country to compete for dominance in the race to build a so-called fifth generation, or 5G, cellular network.

“Going from 4G to 5G is like going from black-and-white to color TV,” added Marcelo Claure, Sprint’s current chief executive, who would retain a board seat of the combined company. “It’s a seismic shift, one that only the combined company can unlock nationwide to fuel the next wave of mobile innovation.”

About 1,000 employees would be added at the headquarters locations in the first 18 months after the merger becomes effective, the companies estimated.

The new T-Mobile said it would invest $40 billion over the next five years to grow and establish its 5G network.

The Federal Communications Commission estimates that U.S. wireless service providers invested $200 billion in technology from 2010 to 2016, and they are projected to invest more than $275 billion over the next several years.

The FCC has to review and approve the merger, a process that could take a year or more, analysts estimated Sunday. The two companies plan to operate independently through that process.

While specific numbers have not been decided, the two companies said there would be some consolidation initially in their retail networks, particularly where stores overlap coverage.

The combination of the two firms network scale is projected to generate cost-saving synergies of more than $6 billion from the merger over several years.

Wireless providers have been among the most active retailers leasing store space, according to a CoStar News analysis.

In an analysis of 15,000 retail leases signed through October of last year by CoStar News, 170 retail tenants signed six or more leases in the first six months of the year. T-Mobile US accounted for 435 of them – by far the most – representing 16 percent of the most active retail tenants signing leases.

T-Mobile also absorbed more square footage than any other single retail tenant totaling more than 712,000 square feet, or about 5 percent of leases signed by the most active retailers.

In terms of the store rollout, T-Mobile opened nearly 1,500 new T-Mobile stores in 2017, and more than 1,300 net new MetroPCS stores. MetroPCS is a prepaid wireless service that is part of T-Mobile US.

Sprint opened more than 1,000 new stores across its Sprint and Boost brands, and is projecting adding several hundred more this year.

All together wireless carriers accounted for 10 percent of the retail square footage signed by the 170 most active tenants through October of last year.

While there will be some closures where stores overlap, the new T-Mobile plans to continue building a retail network most notably in rural areas where there are plans to open hundreds of new stores and creating thousands of new jobs.

While the four major wireless service providers cover 92 percent of the population, their reach into rural communities only covers 55 percent, according to the FCC.

That push deeper into the United States would also mean a shifting of real estate around cell towers and microsites. Legere said the new company would decommission 35,000 such sites out of their combined 110,000 sites. At the same time, they would add 10,000 new sites.

“We are going to be investing in jobs to build the new cell towers to build out 5G, jobs to expand our U.S. call centers and jobs for the hundreds of new stores we intend to open across the country,” Legere said. “In fact, nowhere will that growth be more prevalent than in rural America, which is dramatically underserved today.”

The two wireless communications providers, the third- and fourth-largest in the United States, have been in off-and-on talks about combining for the past four years. They finally agreed Sunday to merge in an all-stock transaction. If approved by federal regulators, the merger would create a company close in size to wireless rivals AT&T and Verizon.

The combined company would account for 31.4 percent of wireless connections, compared to 35 percent for AT&T and 32.4 percent for Verizon, according to the latest FCC data.

Both the number of wireless connections and average data usage per connection have been rising in recent years. That is occurring while both average revenue per connection and average revenue per megabyte have been falling. Competition has intensified and Sprint’s market share has been declining.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience – and do it all so much faster than either company could on its own,” Legere said.

Last fall, with reports that T-Mobile and Sprint were close then to sealing a deal, the Communications Workers of America estimated that a potential merger could result in the loss of at least 20,000 U.S. jobs.

In their announcement and conference call Sunday, the two companies repeatedly emphasized that the merger would create thousands of new American jobs. Legere estimates that 3 million new jobs would be created throughout the industry from the rollout of 5G networks.

“I am confident this combination will spur job creation and ensure opportunities for Sprint employees as part of a larger, stronger combined organization, and I am thrilled that Kansas City will be a second headquarters for the merged company,” Claure said.

Recommended Articles