T-Mobile and Sprint on Sunday announced a merger agreement that would combine the two smallest national wireless carriers into one behemoth that would rival market leaders Verizon and AT&T. But the $26.5 billion all-stock deal has a ways to go before being completed.
Analysts say antitrust regulators may decide to block the combination, which would reduce the number of national carriers from four to three, as they have with similar deals in the past few years. And even once the deal is approved, the companies will face a complicated task to combine their mobile networks, customer support and billing operations, and executive leadership teams. So what does it all mean for ordinary wireless customers?
Does anything change right away?
The status quo typically tends to stick around for a while in a telecommunications merger like this one, which could take a year or more to be considered by regulators. But in the current deal, a lot of Sprint customers get an immediate benefit. That’s because Sprint (S) struck a roaming agreement with T-Mobile (TMUS) that will allow its customers to start connecting via T-Mobile’s network as they move around the country. It’s a four-year agreement that takes effect immediately and stays in place even if the merger is blocked. Right now, the two carriers run on different wireless standards—CDMA for Sprint and GSM for T-Mobile—but about 20 million phones used by Sprint customers can work on both kinds of networks. That includes recent iPhones and Samsung Galaxy phones. Other customers would have to upgrade their phones to take advantage of the new roaming deal.
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What happens to the networks once the deal is completed?
Once regulators sign off and the merger is complete, the new company will move as quickly as it can to consolidate the two wireless networks down into one, because that’s where it can achieve a great deal of cost savings. T-Mobile will be in control, so it’s likely that millions of Sprint customers will have to get new phones. But the same was true when T-Mobile acquired MetroPCS in 2014 and the carrier managed the transition without much pain for customers. At the same time, combining the spectrum rights of Sprint and T-Mobile should give current customers of either carrier more dependable and faster connections over a broader geographic area. The companies also say that merging will allow them to deploy more quickly a much faster 5G-based network.
Will prices go up?
That’s the multi-billion dollar question in this deal. The carriers are promising that they won’t raise prices and that they’ll be just as aggressive competing against AT&T and Verizon as they are today. Sprint CEO Marcelo Claure makes the point that the merger will lower their network costs, so they’ll be able to offer even cheaper service.
But some consumer groups and antitrust experts worry that a market with three major competitors simply won’t incentivize the carriers to continue to compete as strongly. They note that the U.S. market was considerably less competitive before four carriers emerged on the national scene. And competition certainly picked up after regulators blocked AT&T’s (T) bid to buy T-Mobile in 2011.
What about my free Netflix/Hulu/etc?
The carriers haven’t said anything yet about which offers and specials will survive the merger, likely because they haven’t decided yet. So it’s not yet known if all customers would get access to T-Mobile’s free Netflix deal, Sprint’s free Hulu, T-Mobile’s weekly rewards giveaways, or Sprint’s Tidal trial membership. It’s even possible customers will get to choose which deal they prefer.