Five things to know about Sprint’s future
Sprint CEO Marcelo Claure praised a potential merger with T-Mobile as being filled with “enormous” synergies, but he added that other possible outcomes exist for the Overland Park-based wireless carrier.
“Our job is to evaluate all potential options. T-Mobile is one of them, a very important one because of the enormous levels of synergies,” Claure said on CNBC.
Analysts have counted many costs savings from payroll to network spending if the nation’s No. 4 carrier could merge with No. 3 T-Mobile. The combined business also would have nearly as many customers as the industry’s largest wireless carriers, Verizon and AT&T.
T-Mobile’s chief financial officer has called Sprint a “huge prize” and said the cost savings could exceed $30 billion.
“This is a scale game,” Claure said on the cable broadcast. He also said the smaller companies compete by acting as “mavericks” in the wireless marketplace.
“Imagine if you had a supercharged maverick now going after AT&T and Verizon to stop this duopoly,” Claure said.
His words — maverick and duopoly — echoed earlier merger action in the industry and suggested a strategy for pitching a merger to federal regulators.
For example, Sprint had opposed AT&T’s 2011 deal to buy then-No. 4 carrier T-Mobile for $39 billion. Sprint, led by then-CEO Dan Hesse, fought the proposal as anti-competitive and said it would further concentrate the market in the hands of its two giants. AT&T and Verizon would be further entrenched as a duopoly, in which two companies control a market, rather than a monopoly, in which one company does.
Federal regulators blocked the deal, saying they preferred four national wireless carriers. Sprint failed to overcome that preference in 2014 when it dropped plans to seek a merger with T-Mobile.
The Federal Communications Commission already had allowed T-Mobile to buy smaller rival MetroPCS though it considered both to be “mavericks” with a history of disrupting the industry.
Claure noted that his counterpart at T-Mobile, John Legere, as well as heads of the companies that control Sprint and T-Mobile’s future, have touted the synergy benefits of a merger.
It is less clear that consumers would benefit from merging Sprint and T-Mobile, though Claure said Monday that they would.
Some analysts have noted the price cuts both Sprint and T-Mobile have taken to woo subscribers away from Verizon and AT&T. They’ve listed benefits from a merger to include “market repair” that would cool the price cutting and boost the profits of all players.
Claure said merging with T-Mobile would allow the companies to accelerate their development of 5G technologies, which are wireless connections aimed at driverless cars and a host of connected household devices, often referred to as the internet of things.
Still, Claure said other options are open to Sprint. Cable companies and others may be interested in working with the company.
Also, he said, Sprint is performing at “record levels” for growth, profitability and cash flow.
“There is no need to jump into anything,” Claure said.