T-Mobile and Sprint have finally reached the $26.5 billion merger agreement after two previous failed attempts.
T-Mobile’s ‘Sprint’ towards 5G
T-Mobile and Sprint have finally reached the $26.5 billion merger agreement after two previous failed attempts. The new company will be headquartered in Bellevue, Washington, with a second headquarter in Overland Park. John Legere, current president and CEO of T-Mobile US will serve as chief executive officer of the combined entity while Mike Sievert, current chief operating officer of T-Mobile, will serve as president and COO.
The new company aims to “light up a broad and deep 5G network faster than either company could separately. T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity”, says the official statement.
Five years ago, T-Mobile merged with MetroPCS to compete in the 4G era. Now, the combined company will have the network capacity required to create a broad and deep 5G nationwide network in the critical first years of the 5G innovation cycle.
“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,” said Legere. He said that as industry lines blur and ‘we enter the 5G era’, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.
The new company expects prices to drop as competition heats up. The new T-Mobile boasts of having lower costs, greater economies of scale and unprecedented network capacity. It further plans to invest up to $40 billion in its new network and business in the first three years, a massive capital outlay that will fuel job growth at the new company and across related sectors. This is 46% more than T-Mobile and Sprint spent combined in the past three years.
Asda and Sainsbury’s to merge
Asda and Sainsbury’s have decided to merge with an aim to become a supermarket superpower. The combined entity, after the £15 billion merger, will overtake Tesco which currently holds 27.6% market share in the UK, according to Kantar. The new company will command a market share of 31.4% with 2,800 stores. The deal is aimed at creating a more competitive business and the technology to create more flexible ways for customers to shop. The merger will result in Walmart holding 42% of the issued share capital of the combined business and receiving £2.975 billion of cash (subject to customary completion adjustments), valuing Asda at approximately £7.3 billion on a debt-free, cashfree and pension-free basis.
At the time of completion of the combination, Walmart will not hold more than 29.9% of the total voting rights in the combined business, according to the official statement made by the company. Sainsbury’s also owns Argos. It is estimated that the merger would result in job losses as the two work towards reducing duplication. However, Sainsbury’s chief executive Mike Coupe, who will lead the new combined group, assured that the deal would not lead to store closures or job losses in stores.
Coupe said, “This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future across Sainsbury’s, Asda and Argos. It will create a business that is more dynamic, adaptable, resilient and an even bigger contributor to the UK economy. Having worked at Asda before Sainsbury’s, I understand the culture and the businesses well and believe they are the best possible fit. This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.”
The statement from Sainsbury’s said, “(The deal would) Generate net EBITDA synergies, post investments in price, across the enlarged group of at least £500 million.”
Amazon’s multi-billion dollar program
Amazon’s first quarter earnings have revealed that advertising has become a strong contributor to its profitability as it becomes a multi-billion dollar program. The ad stream, referred to as other category in the results, brought in over $2 billion in net sales during Q1, registering a growth of 139% y-o-y. eMarketer forecasts Amazon to become the third largest digital ad player after Google and Facebook.
Facebook’s Q1 ad revenue rose 50% from a year ago to $11.79 billion while Google’s Q1 ad revenue grew 24% y-o-y to $26.64 billion. Amazon also reported a 43% y-o-y increase in revenue, including sales from its recently acquired Whole Foods grocery chain.
The company’s increased revenue can also be attributed to its efforts to strengthen its ad platform.
In December, Amazon said it would start selling video ads on the
Amazon Advertising Platform for its owned properties that run video ads, including Twitch, IMDb, homepage and Fire TV. For Q4 2017, it had reported a 60% y-o-y increase in other revenue for a total of $1.7 billion.
Post Sorrell, WPP holds strong
After Martin Sorrell’s recent exit from the group, WPP has announced its ‘better than expected’ earnings for the first quarter of 2018. Even though the reported revenue for the quarter was down 4% at £3.555 billion, like-for-like revenue less pass-through cost was down marginally at 0.1% . The net new business of $1.737 billion in billings was won in the first quarter.
In a joint statement, Mark Read and Andrew Scott, joint chief operating officers, WPP, said, “In the last two weeks we have focussed on spending time with our clients and people, and the response has been very encouraging. As expected, our people are getting on with business as usual, and our clients have expressed their continued support for and confidence in WPP.”
The financial report informs that functionally, media investment management, public relations and public affairs and specialist communications (including direct, digital and interactive) performed well, with advertising and data investment management more difficult.
North America, with net sales down 2.4%, was the weakest performing region partly offset by strong growth in the company’s media investment management and direct, digital and interactive businesses. The UK, with a net sales growth of 5.4%, performed well across sectors, except brand consulting.
“Mark Read and Andrew Scott are providing the stability and leadership WPP requires, but there is no standing still. They have my and the Board’s full backing to review the strategy, to come back to us with recommendations, and to move forward decisively to implement our vision for the Group,” said Roberto Quarta, executive chairman, WPP.
Smartphone shipments nosedive
Smartphone shipments in China suffered their biggest ever decline in Q1 2018, down by more than 21% annually to 91 million units, according to Canalys’ Smartphone Analysis report. Eight of the top 10 smartphone vendors were hit by annual declines, with Gionee, Meizu and Samsung shrinking to less than half of their respective Q1 2017 numbers.
Mo Jia, research analyst at Canalys, said, “The level of competition has forced every vendor to imitate others’ product portfolios and go-to-market strategies. But the costs of marketing and channel management in a country as big as China are huge and only vendors that have reached a certain size can cope. While Huawei, Oppo, Vivo and Xiaomi must contend with a shrinking Chinese market, they can take comfort from the fact that it will continue to consolidate, and that their size will help them last longer than other smaller players.”
The report further informs that Huawei (including Honor) managed to grow shipments by a modest 2%, maintaining its lead and consolidating its market share to about 24% by shipping over 21 million smartphones. Oppo and Vivo at second and third place respectively, bore the brunt of the overall decline. Their shipments fell by about 10% to 18 million and 15 million, respectively. Xiaomi was the only company to buck the trend, growing shipments by 37% to 12 million units and overtaking Apple to claim the fourth place.
The top four vendors, Huawei, Oppo, Vivo and Xiaomi, together accounted for more than 73% of shipments in China in Q1 2018. The total market share for vendors outside the top five fell from 34% in Q1 2017 to 19% in the first quarter of this year. However, after successive falls in the last two quarters, the market is expected to grow in Q2, as players gear up to launch new flagship devices.
— Compiled by Ananya Saha