Wireless price wars not sustainable, Sprint CEO Dan Hesse says

05/06/2014 11:46 AM

05/06/2014 8:53 PM

Sprint Corp. chief executive Dan Hesse said the wireless price wars aren’t sustainable and show the need for a bigger No. 3 competitor in the U.S.

“A stronger No. 3 will get one and two to react more aggressively so everybody benefits,” Hesse said in an interview on Bloomberg Television Tuesday. “If you are smaller, the big two do not react as aggressively.”

Billionaire Masayoshi Son, who controls Overland Park-based Sprint and has met resistance from regulators skeptical about a merger with T- Mobile US Inc., has been trying to recast the potential combination as being beneficial for consumers. Such a deal would combine the third- and fourth- largest wireless carriers in the U.S., following AT&T Inc. and Verizon Communications Inc.

Sprint has been trying to defend itself amid intensifying wireless competition as T-Mobile has led the way on promotions and price cuts.

“There are a lot of emotions that consumers see as positive, but how sustainable is that?” Hesse said of the price wars.

Both Sprint and T-Mobile posted net losses in the first quarter. Sprint introduced a cheaper plan for Boost pay-as-you- go customers Tuesday, matching a $40 prepaid plan from T-Mobile’s MetroPCS brand.

“T-Mobile and Sprint have to invest more per customer in their network,” Hesse said. “Think of a nationwide network, it largely affects costs. It is like a jumbo jet. AT&T and Verizon, because of their size, can put more customers on that, an divide it among more customers and can spend more money on advertising.”

SoftBank Corp., the Tokyo-based owner of Sprint, is expected to make a formal bid for T-Mobile in June or July, sources told Bloomberg last week. T-Mobile CEO John Legere is the leading candidate to run the combined company, one of the people said.

Hesse said in Tuesday’s interview that it wouldn’t bother him not to run the combined Sprint and T-Mobile.

“I am 60 years old,” he said. “I have a lot of things I still want to do in life.”

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