Judge Asks if Struggling Sprint is Like T-Mobile Before Turnaround
If T-Mobile could turn itself around at the start of this decade, why not Sprint now, Judge Victor Marrero asked T-Mobile CEO John Legere at trial Friday at U.S. District Court for the Southern District of New York. After states grilled Legere, Marrero also asked if T-Mobile would be like ’60s "flower children" who turned into corporate bankers. Legere declined to answer our questions after leaving the courtroom in lower Manhattan.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Some say Sprint today is T-Mobile in 2011 or 12, Marrero said. Legere replied that Sprint's situation is "much more dire" than T-Mobile faced. Sprint's in "big trouble" and probably will be “sold for parts" if T-Mobile can’t have it, he said. T-Mobile got a big break-up fee including AWS spectrum from AT&T when that combination deal failed, and T-Mobile got more airwaves by buying MetroPCS, Legere said. Sprint has less financial and shareholder support, and 5G requirements are bigger than T-Mobile faced in the early 2010s, the CEO added. With no transaction, Sprint "will go away” and Dish Network won't become the new No. 4, Legere said. Dish would get divested T-Mobile/Sprint assets.
Marrero asked if states are right T-Mobile will compete less aggressively when it joins AT&T and Verizon's corporate "club." Those carriers don't play nice with each other now and they "hate me," said Legere. For T-Mobile, acting differently would be “the dumbest loss of gigantic value," he said.
Sprint's "in a tough spot” because it hasn't invested enough in their network; the carrier is "decreasingly relevant," said T-Mobile's next CEO. Mike Sievert. Big Sprint discounts “got our attention" in past years but customers it won didn’t stay after being disappointed with that network and seeing prices go up later when promos ended, he said. He's now chief operating officer.
Marrero asked how T-Mobile's plan to cut its lowest rate plan by half to $15 monthly -- after the deal closes -- differs from Sprint's 50 percent off promotion in 2015 that Sievert said didn't work. What Sprint did was “uneconomic" but T-Mobile can slash prices because the combo gives it "radically reduced costs," he said.
States showed a 2016 email by Sievert saying, “Sprint is a real problem, even though we don't acknowledge it much.” It was during the 50 percent off promo, said Sievert, but states showed other emails from 2017 and 18 with similar sentiments. States showed Legere exhibits where T-Mobile sought to cast Sprint as irrelevant while responding to their price moves. Munger Tolles' Glenn Pomerantz, representing states, said it's “very clear Sprint is not an irrelevant competitor.”
4 to 3?
States showed Legere a text he sent to Deutsche Telekom executives in January 2017 saying the regulatory environment was never better for a four-to-three deal (see 1912100029). DT is T-Mobile's parent.
Legere explained he didn’t mean that in a negative antitrust way. It was a "cheerleading message" to encourage DT board member Thorsten Langheim, using a term Langheim used before, the CEO said. Legere said the combo is better viewed as two to three, seven to six, or four to four, he said.
Legere depicted cable companies as fast-growing rivals. States showed a February 2018 financial-results call transcript in which Legere called cable wireless plays irrelevant.
Sievert sees rapid convergence, including cable and Google entering wireless. Big companies like AT&T are buying video companies to compete more aggressively, he said: Dish will similarly benefit from melding video with wireless products. Cablers use wireless to defend monopolies, and now Comcast Xfinity Mobile has a higher net promoter score than T-Mobile, he said. Tracfone, a large mobile video network operator, is another big competitor that can play the carriers against each other for MVNO contracts, Sievert said.
T-Mobile could compete more aggressively in new areas where others dominate including rural, enterprise and fixed broadband, said Sievert. States objected to talk about entering home broadband because they said increasing competition in a different market is irrelevant to the case. Marrero allowed it.
States asked about T-Mobile smashing Dish in a March 2019 FCC filing shown by states. The document by T-Mobile’s attorneys at DLA Piper claimed Dish had a track record of increasing prices, warehousing spectrum and gaming the regulatory system. The FCC strongly considered those issues in its deal review, Legere responded.
Pomerantz asked if T-Mobile's price commitment to keep rate plans the same for three years would cover device pricing or promotions. It "wasn't intended to cover that," Legere said. Sievert would raise prices "only if it was profitable in the long run," answered the next CEO to a later states' question.