Sprint and T-Mobile Merger a Sure Thing, Says T-Mobile CFO
Sprint looks like it may get some support from T-Mobile concerning a potential merger between the two wireless networks as T-Mobile's chief financial officer stated he believes consolidation is inevitable at a media, internet and telecom conference Monday.
"It is not a question of if, it is a question of when," Braxton Carter said Monday. "To take a third-scale national player that has the scale benefits with the right business model could be very competitively enhancing in the U.S.," he said.
The comments raise hopes about the sale of T-Mobile to Sprint, owned by Japanese-based SoftBank Corp. Both Sprint and T-Mobile have argued that consolidation between the third-largest and fourth-largest carriers in the United States is necessary to compete with the top two that are Verizon and AT&T. Even after combining customer bases, Sprint and T-Mobile would have less than second-largest carrier AT&T.
"The government can't have their cake and eat it too. If they think there really needs to be four players in this market on a nationwide basis, they are going to have to put some structural protections to ensure an adequate distribution of spectrum," Carter said.
The owner of T-Mobile, Deutsche Telekom AG, however, has stated it will continue to plan as if it will be 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."
Recent reports show that Sprint and T-Mobile trail Verizon and AT&T in terms of coverage and service quality. SoftBank chief executive and Sprint chairman Masayoshi Son has been stirring things up at Sprint, attempting to shake the "loser" mentality he believes pervades the Kansas-based carrier.
"Sprint is a daimyo in Kansas," Son said, referring to Japanese feudal lords that have very little power outside their home turf. "That's not enough."
"We need to change Sprint's culture," Son told The Wall Street Journal after a news conference in February.
One solution, Son believes, is acquiring T-Mobile.
"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."
Eccentric T-Mobile CEO John Legere agrees, noting that it is hard to compete with the juggernauts that are Verizon and AT&T.
"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 said during an interview on the television show 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 pleas of Sprint, however, the U.S. government has expressed concern that further market consolidation would end up hurting consumers. Both the Justice Department's antitrust division and the FCC have made it clear they aren't sold on allowing Sprint to acquire T-Mobile.
Sprint's Son will be making his case for a merger with T-Mobile to the Chamber of Commerce in Washington Tuesday.
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