Since becoming the chief executive of T-Mobile US, John J. Legere has been known for being outspoken. Still, as his company held merger talks with Sprint for much of this year, he was noticeably restrained in criticizing his rival.
But when Sprint officially announced on Wednesday that it had abandoned its plans to buy T-Mobile, Mr. Legere took the gloves off on Twitter.
“Is Sprint a melting ice cube? Looks like it to me. Join the cool brand now!” he tauntedin one post.
“Join T-Mobile now and jump off the Sprint bus before it crashes,”he wrote in another.
The tweets reflect not only the reignited competition between the country’s third- and fourth-biggest wireless service providers, but also a peculiar reversal of fortune for each company. T-Mobile, once considered hopelessly behind the competition, has introduced various new pricing plans that have spurred imitation from its bigger rivals.
Sprint, despite having long been bigger than T-Mobile, has had to grapple with steady customer losses as it spends billions of dollars to upgrade its network. And with the prospects of a merger now dead, the carrier and its majority owner, the Japanese telecommunications company SoftBank, must forge ahead alone.
Ever since SoftBank agreed to buy most of Sprint for $20 billion nearly two years ago, it had its eye on acquiring T-Mobile. The goal was to create a credible rival to the giants of the United States wireless industry, Verizon and AT&T.
But government regulators have made abundantly clear for months that they would oppose a combination of two of the four biggest phone service providers, discounting public arguments by SoftBank’s outspoken founder, Masayoshi Son.
“Four national wireless providers are good for American consumers,” Tom Wheeler, the chairman of the Federal Communications Commission, said in a statement on Wednesday. “Sprint now has an opportunity to focus their efforts on robust competition.”
While Sprint could make another run at T-Mobile under a different administration, both companies must operate separately for now. But while Sprint, under a new chief executive whose appointment was announced on Wednesday, most likely will need to remain solo, T-Mobile may yet end up sold — but perhaps to a more unconventional suitor.
Already, Iliad, a French mobile upstart, has offered to buy a 56.6 percent stake in T-Mobile for about $15 billion. And Dish Network, the satellite TV operator controlled by the billionaire Charles Ergen, has hinted in recent months that it may also be interested in a deal.
T-Mobile has drawn takeover interest for good reason. Over the last year and a half, it has attracted millions of new customers with its aggressive new offerings, like free unlimited music streaming and the payment of termination fees for customers who leave rival carriers. Even Verizon and AT&T have started versions of some of those plans in response.
That campaign has yielded good results. T-Mobile added 908,000 monthly customers in its second quarter this year, outpacing analysts’ expectations.
But skeptics wonder whether T-Mobile can continue to grow without handing out inducements, which diminishes profit margins.
“At some point it has to demonstrate that customers are choosing T-Mobile because of its underlying performance as a carrier and not because of gimmicks and giveaways,” said Jan Dawson, an independent telecommunications analyst for Jackdaw Research.
For all his bluster, Mr. Legere of T-Mobile has conceded that his company may need a bigger partner to compete. “If I really want to bring long-term competition and lead this entire industry, capital is important,” he told Bloomberg Television last week. “One of the accelerants could be a transaction.”
And Deutsche Telekom, which owns two-thirds of T-Mobile, has made it clear that it would like to leave the United States market eventually. A deal with Sprint would have accomplished that quickly.
At the moment, however, Deutsche Telekom is not interested in taking Iliad up on its offer, according to a person briefed on the matter. A deal with Iliad, which is based in France and has no presence in the United States, would not offer the bigger scale that T-Mobile needs.
Still, Deutsche Telekom has not yet ruled out talks with Iliad — assuming that the French company is able to significantly raise its bid, this person added. Iliad is reportedly reaching out to potential partners who could supply additional cash.
Another potential suitor is Dish, which has long sought to acquire a phone company to make use of its wireless spectrum holdings. In an earnings call on Wednesday, Mr. Ergen hinted that he remained interested in a potential bid.
“To the extent that Sprint either dropped out or wasn’t interested or the government wouldn’t allow it,” he said, “then T-Mobile is something that we’d have an interest in.”
Those options are largely unavailable to Sprint. Under SoftBank, the carrier has poured billions of dollars into upgrading its aging network to the latest technology, called 4G LTE, which is much faster than the previous wireless standard. Yet that work has led to customer complaints about network quality, driving many into the arms of Verizon, AT&T and T-Mobile. The company lost 245,000 customers in its most recent fiscal quarter, though that was fewer than in the period a year earlier.
Now Sprint must continue its turnaround under Marcelo Claure, a Bolivian-born entrepreneur who joined its board in January and is succeeding Daniel R. Hesse. His résumé is unusual for a wireless chief. He founded and ran Brightstar, a wireless services company that SoftBank acquired earlier this year, but he has not worked at a cellphone service provider. (He does happen to own Bolivar, one of the most successful soccer teams in Bolivia.)
For the moment, his mandate is to continue Sprint’s self-help plan. “In the short term, we will focus on becoming extremely cost- efficient and competing aggressively in the marketplace,” he said in a statement.
Bill Menezes, a research analyst for Gartner, said the first thing that Mr. Claure should do is come up with some innovative offerings for consumers and a fresh marketing plan. He said that Sprint was already well along in upgrading its wireless network but was lacking a unique brand identity and a value proposition to attract customers.
And it will most likely need to devise new pricing plans, he said, because its current “framily” line of offerings have proved to be unattractive.
“The incoming C.E.O. is really going to have to resurrect the brand and come up with some new ideas,” Mr. Menezes said.
One option that appears less likely, at least for the moment, is another deal. It is unclear who Sprint could buy should T-Mobile remain off the table. One possibility is some sort of partnership with Dish, with which the company is collaborating on a wireless broadband venture in Texas.
Sprint’s new chief said that deal-making was taking a back seat in his agenda. “While consolidating makes sense in the long term, for now we will focus on growing and repositioning Sprint,” Mr. Claure said.
NY Times
NY Times
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