Sprint and T-Mobile Merger: Deutsche Telekom Planning to Stand on its Own
Sprint's support for acquiring fellow wireless service provider T-Mobile may be dwindling faster than it had hoped. Arguments that the two carriers can better compete with juggernauts Verizon and AT&T may lose steam as Deutsche Telekom AG, the owner of T-Mobile, is confident that T-Mobile can stand on its own.
"We have a standalone position which is good and which we're building out," Deutsche Telekom CEO Timotheus Hoettges said at an earnings press conference in Bonn, Germany on Thursday. "You can't build your planning on a potential transaction. It's really difficult to judge."
Hoettges helped propagate the T-Mobile and Metro PCS merger two years, and is now apparently focusing on long-term strategies that involve T-Mobile going at it alone. Hoettges hasn't ruled out a sale of T-Mobile to SoftBank Corp, which owns Sprint, but made it clear that he isn't about to put any big bets on an unsure thing.
"I don't want to insist on consolidation, but I don't want to rule it out," Hoettges said at the press conference. "We have to see how we grow the value of the company with the money that investors have entrusted to us."
Sprint chairman and SoftBank Corp. president Masayoshi Son has been aggressively pursuing T-Mobile over the last couple months, insistent that Sprint is doomed to mire in stagnation unless it's able to grow to a size that can compete with Verizon and AT&T.
"Without industry consolidation, for Sprint alone to become No. 1 in the U.S. is literally just a dream. I'm not content for Sprint to remain No. 3 because if we could grow bigger, we will offer aggressive discounts and services, just like we did in Japan," Son said during the recent Sprint quarterly earnings report.
"There is a huge gap between the bigger two and the smaller two, thus the level of competition isn't sound or strong."
T-Mobile CEO John Legere agrees, although not as explicitly.
"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," Legere, T-Mobile's eccentric CEO and president said during a January interview on Bloomberg West.
"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."
Despite the carriers' arguments that Verizon and AT&T essentially form a duopoly that actually stifles market competition, the U.S. government is wary of allowing such a deal to happen. Both antitrust officials and the FCC have expressed concern that market consolidation in a market where there are only four major players will end up hurting consumers.
Even with a combined consumer base, a Sprint and T-Mobile network would still have less subscribers than the second-largest carrier in the United States, AT&T. Such numbers help display the wide gap between the top two and the next two networks in the U.S. national wireless market.
Son will be traveling to Washington next week to make his case to the Chamber of Commerce, where he hopes to drum up support for acquiring T-Mobile.