Following news that the US Department of Justice has approved the merger of T-Mobile and Sprint, Tammy Parker, Technology Analyst at GlobalData, offers her view on the impact on the US mobile sector
“T-Mobile’s $26.5 billion takeover of Sprint took a giant step forward, thanks to an unlikely rescue from Dish Network, which pulled a rabbit out of its hat to set itself up as a fourth national wireless operator and retain spectrum that it was likely going to have to hand back to the U.S. Federal Communications Commission.
Rival mobile operators are likely breathing a sigh of relief. Although the new T-Mobile is gaining scale that will enable it to compete more aggressively, the entry of Dish as a fourth national operator is not a significant threat.
Dish has no track record in building out a nationwide wireless network or conducting business as a wireless MVNO or network operator. Furthermore, it has the distraction of dealing with the ongoing decline of its core satellite pay-TV business as customers shift to over-the-top streaming services.
The deal with Dish Network is a tremendous victory for T-Mobile and Sprint, which now expect to complete their merger before year’s end. Though T-Mobile is giving up Sprint’s 800 MHz spectrum and the Boost, Virgin Mobile and Sprint prepaid brands to Dish in exchange for $5 billion, T-Mobile will get to keep all of Sprint’s 2.5 GHz and PCS spectrum, which is key to its ambitious 5G rollout plans.
It will also potentially be able to lease some or all of DISH’s 600 MHz spectrum to flesh out coverage. The agreement is also a face-saving win for Dish Network, which could be forced to relinquish certain spectrum licenses it holds if it does not meet network buildout requirements by March 2020.
Dish now has leverage to convince the Federal Communications Commission to modify terms of Dish’s spectrum licenses to enable it to build out a 5G broadband network capable of serving 70 percent of the U.S. population by June 2023.
However, T-Mobile and Sprint still need merger approval from the California PUC, and they need to convince opposing state attorneys general to give their blessings to their merger and drop a multi-state lawsuit opposing it. Furthermore, numerous Democratic presidential contenders are lined up to oppose this deal and will do their best to drum up public opposition in coming weeks.”
“Personal income tax reductions were a massive focus in last year’s budget, and it was no surprise that it took the spotlight again this year ahead of the election polls. This will be greatly appreciated by small businesses, who have been fearful that a sluggish economy is hurting consumer confidence. As we approach the election, many small businesses say Labor’s plan to enforce a living wage could negatively impact their bottom line. By making changes to income tax rather than adding legislation on wages, the Coalition will have the upper hand with small businesses on this subject.”
Instant Tax Asset Write-Off
“The extension of the instant asset tax write-off to 2020 is great and comes as no surprise. But what’s a real win for SMEs is the increase of the threshold to $30,000, as well as the expansion to include mid sized businesses with an annual turnover of up to $50 million. These will go a long way in providing a more stable prospect for around 3.4 million businesses.
However, there is always more to be desired. Many small businesses who were hoping for the policy to be enshrined in permanency will be closely monitoring Labor’s campaign on this front in the lead up to the election.”
“However, our research shows that while 91 per cent of small businesses want to see the initiative extended, only half (53%) have utilised the tax offset since it was set in place, indicating a need to educate business owners on what they can actually write off, such as vehicles and equipment.”
R&D Tax Incentive and Innovation
“Many of us tech companies were hoping to see a renewed focus on the R&D tax incentive and get a little more clarity on the scheme, so it’s disappointing that this was only lightly broached. It’s also worrying that expenses for the Department of Industry, Innovation and Science is expected to decrease over the course of the year.”
“Australia has been wanting to position itself as a regional innovation hub for some time now, but still lags in comparison to the progress we’ve seen in China, South Korea and Japan. Any further roadblocks like these will not only have huge implications for businesses that rely on the tax concession to drive research, development and innovation, but for the broader industry and national economy.”
Export Development Grants Scheme
“The $60 million top-up to the Export Development Grant Scheme is a positive step forward in taking Australian SMEs global and enabling them to effectively compete on a world stage. Cash flow is the number one pain point keeping small businesses up at night, which has in turn inhibited their growth ambitions.
Like it or not, international brands are entering our space and chipping away at market share. To survive and thrive, small businesses cannot maintain status quo and need to start thinking about additional markets to penetrate and audiences to reach.”
Tech Skills Shortages & Migration
“The introduction of the pilot Global Talent Scheme last year is definitely a welcomed initiative for the tech industry. However, more can be done to make Australia a more attractive and competitive market for overseas talent. We had hoped for some discussions around skilled migration policies in the budget, especially with the current and very real shortage of tech-focused skills in Australia.”
“It would be ideal if the Global Talent Scheme was extended beyond July 2019, and also have its minimum income requirement lowered. This will enable SMEs that do not have the same level of resources as large enterprises to have a fair chance at securing and importing in-demand tech skills.”
Corporate Tax Cuts
“The reduction of the corporate tax rate for small businesses to 25 per cent couldn’t come sooner. We are pleased with the government’s decision to bring it forward to 1 July 2021. A lower tax rate will reduce businesses’ inhibitions on capital investment, hiring and wage growth, which will in turn create a positive knock-on effect on average household income, benefitting Australia as a whole.”
“In our survey, almost half (45 per cent) of small businesses say a further reduction in corporate tax rate in critical to their success. With nations like the UK reducing its rate to 18 per cent and the US holding steady at 21 per cent, more reforms are required to ensure Australia remains an attractive destination for businesses to set up shop.”
Small Business Education, Training & Upskilling
“We welcome the government’s investment of $525.3 million in vocational education and training. With Australia experiencing a skills gap spanning many trade professions from carpenters to electricians, more support in the form of education, training and upskilling is a certainly a positive outcome for small businesses.”
“While tax cuts go a long way in helping small businesses improve their cash flow, today’s pace of technological change has meant that more needs to be done to enable them to stay ahead of the curve. This is reflected in our pre-budget survey of Australian small businesses, which found that 83 per cent of respondents want the government to provide more subsidies for skills and training.”
Black Economy Crackdown
“The continued measures to crack down on the black economy will go a long way in levelling the playing field for small businesses. Those that engage in related activities such as ‘cash only’ for illegitimate reasons are getting an unfair advantage as they can undercut other businesses doing the right thing and who are paying their fair share of taxes.
It is great to see that the clampdown has already generated in excess of an additional $5 billion. It shows that the measures are a step in the right direction, and we’re looking forward to the next string of actions and proposals from the Black Economy Taskforce.”
“We welcome the Coalition’s plans to offer additional funding to financial regulators, but small businesses will need reassurance that credit sources do not dry up as more stringent checks are introduced. In Reckon’s research, 44 per cent of small business owners say they have already been affected by falling house prices and tighter lending conditions imposed by banks. This comes as no surprise, given many small business owners secure loans on their homes.”
“Federal and state governments need to do more and think harder about attracting new start-ups and established SMEs from larger cities to regional Australia. Many start-ups and small business owners still struggle with the major cities’ high living costs and worry they will never be able to buy a house. The additional $1 billion funding boost to regional Australians is a positive step forward, and will help in enhancing liveability of those areas. However, more can be done.”
“Specific regional incentives will encourage small business owners to relocate and take advantage of more affordable housing, while creating valuable employment opportunities in regional Australia and easing the pressure on major metropolitan areas.”
Rising Energy Prices
“The government’s injection of $79.2 million investment in new energy efficiency measures is a step in the right direction, but more can be done. The massive electricity price hike over the past few years has clearly been crippling many Australian small businesses. In our survey of Australian SMEs, 69 per cent say they have been affected by increasing energy prices, showing a high demand for policies that encourage electricity cost reductions.
The Coalition has confirmed it will underwrite several energy generation projects to bring down prices, which could include gas and coal. While this will please some small business owners, it will alienate those that are more environmentally conscious.”
Sam Allert is CEO of Reckon, a Sydney-based software company that provides desktop and cloud-based accounting software for accountants, bookkeepers, small to medium businesses, and personal users.