T-Mobile's Successful First Quarter Could Affect Merger With Sprint
Looks like T-Mobile's goal to shake up the wireless industry is paying off. The carrier reported an incredibly successful first quarter, adding more subscribers than any other U.S. wireless service provider and overtaking Sprint as the No. 3 smartphone buyer.
The encouraging results will certainly spur on Sprint's efforts to acquire the company but might not be as convincing to the U.S. regulators standing in the way.
T-Mobile ended up adding 1.3 million customers during the first quarter of 2014, around 300,000 more than analysts had expected. The 1.3 million also tops the 1.16 million that AT&T and Verizon, the top two carriers in the United States, added during the same time period. T-Mobile also ended up purchasing 6 million smartphones, 1 million more than Sprint. T-Mobile attributes its success to the aggressive "Un-Carrier" strategy of doing away with traditional wireless practices like contracts, data limits, and overages.
"A year ago I promised that we would bring change to what I called this arrogant U.S. wireless industry," T-Mobile's eccentric CEO John Legere said a company statement. "We are delivering on that promise and our results reflect the growing customer revolution that we've ignited."
The numbers will certainly please Sprint parent company SoftBank's chief executive Masayoshi Son. The Sprint chairman has been pursuing a deal to acquire T-Mobile over the last few months, citing scale necessities to bring competition to a stagnant U.S. mobile market dominated by a "duopoly" of AT&T and Verizon.
"I brought the network war and price war (to Japan). I'd like to bring that to the States," Son said at the U.S. Chamber of Commerce to industry officials in March. "I would like to provide an alternative to the oligopolistic situation that two-thirds of American households can only get access to one or two providers. I'd like to be a third alternative with 10 times the speed and lower price."
"If the government wants us to have a competitive environment, you are going to make sure that the duopoly doesn't use their prowess to crush the little guys and have this sub-1 GHz spectrum be moved all to them," T-Mobile CEO John Legere said in an interview on television show "Bloomberg West" earlier this year. Legere is said to be the likely leader of a combined Sprint and T-Mobile company, according to Bloomberg insider sources.
"We're all going to need better scale and capability. The question starts to be, how do you take the maverick and supercharge it? We either need more spectrum and capability, a lot more investment, or we need consolidation."
Such a deal, however, has run into opposition from the FCC and antitrust officials, who fear further market consolidation could harm consumers. Previous efforts to acquire T-Mobile have fallen through and the government tends to view T-Mobile as a dark horse that injects new life in the industry. If T-Mobile continues to show it can add record consumers (despite overall losses), it might be harder for government officials to see the necessity of a merger with Sprint.
Sprint has been tipped to make a bid in June or July.
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