Between getting approvals from the Federal Communications Commission (FCC) and Department of Justice (DoJ), T-Mobile had to change its original plan in how it will combine with Sprint. But T-Mobile executives say their plan is only being enhanced—and they’re OK helping Dish Network become a viable competitor.
T-Mobile is still contending with states that are trying to block the deal. That’s ongoing litigation and the company can’t go into much detail on that—in terms of whether it will strike a deal with the attorneys general or end up going to a trial, which is set for December 9.
“We’re very confident the deal will close about three months ago,” joked Mike Sievert, president and COO of T-Mobile US at the start of the Goldman Sachs Communacopia Conference in New York on Tuesday.
But he added that while both the FCC agreement and DoJ settlement required changes in the plan, all the main synergies of the deal remain in tact. “There were certain core principles that we needed to hold to,” he said.
“Either the attorneys general themselves or ultimately if we go to trial on December 9 by the judge—it’s a strong case and we’ll let the merits of it speak for themselves,” Sievert said.
The New T-Mobile will be divesting Sprint’s prepaid brands and 800 MHz spectrum to Dish while supporting Dish’s entry into the wireless market via a seven-year MVNO deal. So what makes T-Mobile confident it can succeed while enabling a potentially disruptive new entrant in the form of Dish?
The vast majority of the synergies come from the network side, not burdening consumers to pay for two separate networks but supporting one stronger network, and that’s more cost efficient. That plan is only being enhanced as time goes on, according to Sievert.
“Look, Dish is going to come in. They’re going to be a viable competitor. On the other hand, there are opportunities for us in that competition,” by being a provider to Dish. “We made sure that the arrangement we have with Dish simultaneously accomplishes our goals and theirs. We can monetize the arrangement in a way that’s attractive for our shareholders in the MVNO deal… We’ve never been a company’s that’s shrunk from competition. We love competition. We thrive on it.”
Braxton Carter, T-Mobile’s CFO and executive vice president, said the company is more than happy to facilitate competition and Charlie Ergen’s Dish Network. “I would never bet against Charlie Ergen,” he added, noting Ergen’s done an “amazing job” building a company over the years and parlaying it into wireless. “He certainly has the wherewithal to do so.”
With the MVNO arrangement, T-Mobile will be losing revenue from Sprint's prepaid business but replacing it with a wholesale arrangement. Looking at the overall economics of the New T-Mobile, “it was fairly neutral. Let’s leave it at that,” Braxton said.
The disposition of the 800 MHz spectrum is a delayed deal; that spectrum can’t be disposed until all the customers are migrated off the Sprint network and that network is shut down. With the sale of the prepaid business, it also reduced its bridge commitment from $30 billion to $27 billion.
“We’re hopeful we can still get this deal closed this year,” Braxton said. “But if we do in fact go to litigation, this deal will not close until early 2020.”
A key reason for the merger is that by uniting the spectrum positions—T-Mobile’s low-band with Sprint’s mid-band—as well as millimeter wave on top of that for the “layer cake”—the New T-Mobile will be in a better position than its rivals AT&T and Verizon.
T-Mobile CTO Neville Ray also said he’s been authorized to do some work in getting ready to deploy using Sprint’s 2.5 GHz as soon as the deal closes. “Nobody is more impatient for this thing to close than me,” he said. “I wish I was deploying 2.5 radio on the network right now.” But it has been securing permitting and authorization to deploy 2.5 GHz, so as soon as the deal closes, it can start laying down 2.5 GHz radio on the New T-Mobile network.
That will allow them to decommission redundant sites and gain the synergies on the network side. From a competition perspective, “we’ve caught up with Verizon and AT&T,” Ray said, with 326 million people covered with LTE. “We are right there with those guys, and we continue to make sure we stay in that position.”
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If the merger closes, it can quickly start to layer in that 2.5 GHz spectrum and provide a “transformative” 5G service, he said. The combination will enable it to go from 30 Mbps today to 400 Mbps—a terrific increase in speed. “I want to do that as fast as humanly possible,” Ray said. “I’ve caught up with AT&T and Verizon. Our intention is we move ahead of them incredibly quickly and we start that move ahead in 2020” and accelerate it in 2021.
The wireless business has been heavily reliant on network brand and network perception for a long time. “We still have our work to do on perception, but ... now we’ve leveled the playing field with those guys on LTE.”
In the 5G era, T-Mobile intends to leapfrog the competition with its spectrum assets. “I want those guys to be chasing my network and my team and our execution,” and it’s going to be difficult for rivals to do with the spectrum in their hands today, he said.
Sievert painted a picture of 5G being a perfect time to do all of this because it’s causing reconsideration on the part of consumers. “It’s a fantastic opportunity for us,” he said.
Most of the customers have come to T-Mobile for the “uncarrier” value proposition, and they were wondering if they were trading something off on the network side. “What happens when for the first time in this industry, one brand can present consumers with both” with the best network and offering the best value. “I think it’s very important that we move quickly,” he said.