& cplSiteName &

Does T-Mobile Need Sprint to Scale?

Dan Jones
7/31/2014
50%
50%

Does it actually make sense for T-Mobile to merge with Sprint?

That question popped up a couple of times from finacial analysts in the question and answer session at the end of the operator's second quarter earnings call Thursday morning.

Here's the basic concern: T-Mobile US Inc. is, as CEO John Legere said on the call, "the fastest growing wireless company in America." The company added more than 1.5 million subscribers in the quarter to top 50 million subscribers. Sprint Corp. (NYSE: S), meanwhile, continues to lose subscribers -- albeit at a slower place -- with 220,000 jumping ship in the second quarter. Sprint actually lost 646,000 phone users in the quarter, but regained some ground with tablet adds. (See Sprint Seeds Market with LTE-A Handsets.)

Interestingly, Legere also questioned the idea that T-Mobile is just getting new customers as people defect from Sprint. "A significant amount of them are former AT&T customers," he claimed.

So should T-Mobile -- a brand that appears in the ascendent -- tie itself to Sprint, which Legere described as "bleeding" subscribers?

"T-Mobile is doing everything that's necessary to organically and inorganically grow this company," Legere said, while refusing to comment directly on the prospects of a Sprint/T-Mobile merger. (See Sprint, T-Mobile Settle on $32B Price and DT Asks for $1B Prenup for Sprint, T-Mobile — WSJ.)

He stressed that T-Mobile has "multiple versions of things" it can do to grow "inorganically" and doesn't need to rush into anything. "This company is not in need of doing something to be successful in the short or medium term," he said.

Nonetheless, even Legere admits that in the long-term, T-Mobile needs to grow to compete squarely with AT&T Inc. (NYSE: T) and Verizon Wireless . "If you look at the long-term of the wireless industry, it is a scale game," he stated.

More spectrum acquisition is definitely one possibility for expansion. An AWS-3 auction is coming on November 13, and the spectrum incentive auction is expected in 2015. (See FCC Chief: Keep Spectrum Open for Smaller Carriers.)


For more on LTE and spectrum, visit Light Reading's dedicated LTE channel.


"We're more than comfortable that we have the flexibility to participate in these upcoming auctions," said CFO Braxton Carter.

Spectrum would certainly be part of the major raison d'etre for any Sprint merger. And it would be a major task to integrate the two competitor's network into a cohesive whole. (See Sprint & T-Mobile: A Tale of Two Maps.)

On the whole, I just thought it was interesting call. A Sprint/T-Mobile deal has been reported almost as a done deal in the business and trade press recently, but Legere certainly wasn't going there.

And the carrier certainly does have options, as Thursday's $15 billion bid by French operator Iliad for a 56.6% stake in T-Mobile proves.

— Dan Jones, Mobile Editor, Light Reading

(8)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
briandnewby
50%
50%
briandnewby,
User Rank: Light Sabre
8/11/2014 | 4:14:59 PM
Re: ?????
Milan03--it does make sense.  Churn, by its definition, is a percentage greater than 0.  Sprint has initiatives to reduce churn, but churn (again by definition) exists.  Whether it's 2 or 5 percent, an effort to reduce churn simply slows the leak.

Conversely, and the part that doesn't make sense, is that Sprint has always been a company that tries to hold onto it's existing (business) customers rather than investing in pure acquisition.  The cliche there is that it more expensive to get a new customer than hold onto one.

Yet, if in doing so, you write down your revenue to keep the customer and, further, fail to realize that others are targeting your customers even if you aren't targeting theirs, any kind of "churn taskforce" will have limited return.

That's the point. 

I do agree that the move wouldn't have paid off--and, in fact, feel pretty good about my comments before the CEO change.  I think Sprint's problems grew over the past week.  They need a culture change but neither their CEO nor the chairman has done that before.  They may be geniuses in building a start-up or in aquisitions, but managing a turnaround--there's no track record.  I sadly (former Sprinter) agree with T-Mobile that Sprint is destined for number four in the market, and soon.
mhhf1ve
50%
50%
mhhf1ve,
User Rank: Light Sabre
8/6/2014 | 3:14:16 PM
No.
Now that Sprint and T-Mobile will not be getting together any time soon, I think T-Mobile doesn't need Sprint to continue its strategy of growth at all costs... unless it starts running out of money to re-invest in its coverage.

I don't think Sprint would have really helped T-Mobile's coverage spread that much -- and the overlap might have even been hindering.
milan03
100%
0%
milan03,
User Rank: Light Sabre
8/3/2014 | 1:19:20 AM
Re: ?????
"Sprint--churn numbers aside--would always hold onto a customer rather than get a new one."

That doesn't make much sense, does it? The truth is Sprint isn't really acquiring much customers, nor keeping them. Can't ignore their churn as it's the highest in the industry.

Merging Sprint with T-Mobile would ultimately be a terrible move, aside from financial scale they'd have to figure out technology synergies, and that would become one innefficient and bloated network. They wouldn't even gain much rural coverage as two networks for the most part overleap.
danielcawrey
50%
50%
danielcawrey,
User Rank: Light Sabre
8/2/2014 | 7:17:45 PM
Re: ?????
It seems to be a sensical merger. Sprint has high capacity data - but not great coverage. T-Mobile's data is not as fast - great coverage is also a problem.

But the two could work together - leveraging T-Mobile's marketing prowess - to compete with Verizon and AT&T. 
briandnewby
50%
50%
briandnewby,
User Rank: Light Sabre
7/31/2014 | 10:05:21 PM
Re: ?????
T-Mobile seems to be more about aquiring customers rather than working/mining a base of customers.  Sprint--churn numbers aside--would always hold onto a customer rather than get a new one.

So, T-Mobile is more likely to be on a growth curve. If you are not chasing other company's customers--while trying to mind the store in a business that bleeds customers naturally--many of your best customers still are going to get poached, you won't have the aggressive mindset to get new, high-value customers, and this story line has played out at Sprint for years, first on the wireline side and now on the wireless side.

So, does T-Mobile gain competencies with Sprint?  Not really.  Spectrum? Yes, but that doesn't seem to be holding T-Mobile back right now.  Brand presence? Not really if we are to believe that T-Mobile would be the surviving brand name.  A deeper leadership bench? Doubtful.

Now, if the question is truly, "Does T-Mobile Need Sprint to Scale?" the answer is no in that it's questionable that Sprint would be enough for T-Mobile to scale to the breadth of AT&T and Verizon.  But if the question is "Does T-Mobile Need Sprint at All" I think the answer isn't as resounding, but is still a no.
mjagernauth
50%
50%
mjagernauth,
User Rank: Light Beer
7/31/2014 | 5:12:43 PM
Re: ?????
I think a T-Mobile-Sprint merger is a very bad idea. See this post: http://www.rcrwireless.com/article/20140715/opinion/reality-check-will-wireless-competition-disappear/
ldgregg
50%
50%
ldgregg,
User Rank: Light Beer
7/31/2014 | 4:58:36 PM
Re: ?????
If you're the fastest growing carrier and you lose money on every sub, you will also be the fastest to go out of business. You can't simply look at Gross Add number. You need to look at the Churn Rate and Net Add number. It's a delicate balance to achieve profitability. If you're bleeding with every new sub, you will eventually need to change direction or shut the doors (which is exactly where Legere led his last company, Global Crossing). You don't achieve profitability through no-contract and ETF-payoff offers. These are costly tactics that will grow your sub numbers, but are just not profitable. All show, no dough! Here's a big challenge with a Sprint-T-Mobile merger: two different network technologies. While Sprint has shown that it can manage two different networks, it is really not where you want to be as an operator - ever, let alone do it twice. When you merge, one goal is to achieve cost efficiency and you can't do that when the units are not fully integrated It takes a lot of time and money to migrate to a nationally consistent technology and supporting infrastructure and that's more than a challenge when you have a base that's not profitable. It would take a merged Sprint-T-Mobile a long time (if ever) to approach the profitability of its competitors. When it comes to mergers like the proposed Sprint-T-Mobile deal, you can't assume it's a "done deal". The AT&T acquisition of T-Mobile made a lot more sense (at least from a business standpoint) and look what happened to that. T-Mobile does have a very profitable business in collecting break-fees to bolster the bottom line, though.
DanJones
50%
50%
DanJones,
User Rank: Blogger
7/31/2014 | 3:26:59 PM
?????
What do you think?
More Blogs from Jonestown
Randall Stephenson and John Legere weigh in the Black Lives Matter movement, with AT&T executive telling employees he wants a company conversation, starting with him.
Software-defined radio access networks are coming up on the virtualization menu at some point in the near future.
The idea is simple: a version of LTE that doesn't use much power for IoT applications. But naming it is hard – rilly, rilly hard!
LinkNYC shuts down web access on the street kioks because some people were hogging them and using them 'inappropriately.' Who could've guessed that would happen?
Woo hoo! It's the end of a wretched era.
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, October 5, 1:00PM EDT
Gigabit & Smart Cities
Joe Kochan, COO & Co-Founder, US Ignite
UPCOMING COURSE SCHEDULE
Friday, October 7, 1:00PM EDT
Gigabit & DOCSIS 3.1
Ty Pearman, Director, Access Architecture, Comcast
Wednesday, October 19, 1:00PM EDT
Securing a Virtual World
Rita Marty, Executive Director, Mobility and Cloud Security, Chief Security Office, AT&T
Friday, October 21, 1:00PM EDT
Security: Evolving the Data Center
Rasool Kareem Irfan, Head, Telecom & Infrastructure Security Practice, Tata Communications Transformation Services Ltd (TCTS)
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Documentaries
From Philly, With Love

9|30|16   |     |   (5) comments


Join Alan Breznick, cable's answer to the Italian Stallion, as he runs through the highlights of SCTE Cable-Tec Expo, lumbers along in Rocky Balboa's footsteps and searches for the perfect Philadelphia cheesesteak.
LRTV Interviews
CenturyLink: SD-WAN Customers Looking for Value Not Cost Savings

9|30|16   |   5:31   |   (0) comments


At NFV & Carrier SDN in Denver, CenturyLink's Eric Nowak told Light Reading that when customers launch SD-WAN, they aren't necessary looking to save money, but instead they are looking for more value from what they're spending. He also shared some unique case studies and lessons learned from launching SD-WAN services.
LRTV Custom TV
Flexible Deployment Approaches for the Gigabit Services Evolution

9|29|16   |     |   (0) comments


For many operators, the gigabit evolution begins with the shift from DOCSIS 3.0 to DOCSIS 3.1. But that move represents a change not only in the protocol itself, but in the approach to architecting their entire DOCSIS delivery chain -- from the headend to the outside plant and home gateway components.

Jonathan Ruff, senior director of global technical ...

LRTV Interviews
Level 3 VP: Enterprises Need More for Less

9|29|16   |   05:27   |   (0) comments


Andrew Dugan, Level 3 group vice president of global technology and IT, says enterprises need more bandwidth and they need it faster and with greater security, but they want to spend less, if possible. They are looking to carriers to reduce their network complexity and help protect them from cyberattacks as well.
LRTV Interviews
CenturyLink: SDN/NFV Pose New Interconnection Possibilities

9|28|16   |   04:37   |   (0) comments


Network operators should develop new APIs and business processes for reselling virtual assets to each other, says CenturyLink's Bill Walker. That will enable them to build digital business portfolios that help them avoid becoming commodity transport providers.
LRTV Interviews
Level 3: Overcoming Terror of Being Supplier, Integrator & Developer

9|28|16   |     |   (0) comments


At Light Reading's NFV & Carrier SDN event in Denver, Travis Ewert of Level 3 Communications said there is terror in becoming supplier, integrator and developer, but it can be overcome and be cost effective.
LRTV Custom TV
Introducing IoT World News

9|27|16   |   01:43   |   (0) comments


Self-driving cars, medical sensors, smart cities... and refrigerators. In order to address the huge scope of IoT, KNect365 has created a unique online community that will help businesses to understand and monetize the opportunities that live within the IoT market. We look forward to welcoming you to IoT World News -- your gateway to a better connected future.
LRTV Interviews
AT&T: Reusable Functions Next NFV Key

9|27|16   |   06:03   |   (0) comments


The next generation of NFV has to break functions down into reusable software chunks, making everything much more cloud-like.
LRTV Interviews
Masergy on Security: Attackers Gaining Upper Hand

9|27|16   |   5:10   |   (2) comments


At Light Reading's NFV & Carrier SDN event in Denver, Ray Watson, vice president of Global Technology at Masergy, says that because of the growth in virtualization, the threat landscape is shifting in favor of the attackers. As a result, service providers need to think beyond just defending the perimeter and take a more holistic approach to security.
LRTV Interviews
Verizon Takes Next Step on Biz Virtualization Journey

9|26|16   |   4:38   |   (2) comments


At September's NFV & Carrier SDN event in Denver, Light Reading sat down with Victoria Lonker, director of Product and New Business Innovation at Verizon, to chat about where the carrier is with delivering virtualized services to business customers.
LRTV Interviews
Global Services: The $40B Face-Off

9|26|16   |   05:53   |   (1) comment


More service providers than ever before are battling it out to win a slice of what is now a $40 billion global communications services pie, explains Ovum Principal Analyst David Molony.
LRTV Documentaries
MEC Congress: The Key Takeaways

9|22|16   |   03:25   |   (3) comments


Three key takeaways from the Mobile Edge Computing (MEC) Congress in Munich, Germany.
Upcoming Live Events
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Eurobites: Telefónica Taps Juniper for Network Security
Paul Rainford, Assistant Editor, Europe, 9/26/2016
AT&T CEO Backs Black Lives Matter
Dan Jones, Mobile Editor, 9/30/2016
Powell Kills the Cable Show
Mari Silbey, Senior Editor, Cable/Video, 9/29/2016
Telstra Sees Quadrupled Data Capacity by 2020
Carol Wilson, Editor-at-large, 9/28/2016
From Philly, With Love
Alan Breznick, Cable/Video Practice Leader, Light Reading, 9/30/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
There's Nothing Like Missing a Full Minute of Pokémon Go Click Here
Live Digital Audio

A vital part of increasing the number of women in comms is transforming the ways companies can support and empower women. While progressive company policies that support both men and women in achieving work-life balance are a step in the right direction, creating a company culture that supports those policies can at times be more challenging.

During this show, we'll talk to Lynn Comp, Senior Director of Industry and Sales Enabling (ISE) in the Network Platforms Group at Intel, about why those challenges exist and how companies can overcome them. She'll provide insight into how Intel has worked to create a culture that supports work-life balance, and provide steps and guidance for other companies wishing to do the same. We will also leave plenty of time to get your questions answered live on the air.