John Legere, T-Mobile US’ outspoken Chief Executive Officer, was asked today at the Consumer Electronics Show about a merger or acquisition of Sprint and he replied that this could be “a potential future outcome” under the new administration. The question was asked during T-Mobile US’ questions and answer session, which followed the main session during which America’s third largest carrier announced it was going “All In” on monthly plans. Legere was asked about the rumors of a deal between Sprint and T-Mobile US and after first applauding SoftBank’s planned $50 billion investment into the U.S., Legere went on to explain that “Sprint needs to do something.” During Legere’s main presentation he was scathing of Sprint’s current position in the market: T-Mobile US overtook Sprint in late 2015 by subscriber numbers, and Sprint is seen to be struggling with the need to upgrade its network and utilize its considerable 2.5 GHz spectrum. Over the last year we have seen Sprint arrange a number of deals in order to improve its financial situation, such as sale and leasebacks of network assets, as well as push ahead with a different way of upgrading its network by utilizing many, many small, short ranged cell sites rather than longer ranged masts.
Legere highlighted that Sprint have made progress but are still on the long road to recovery. He believes that from a scale perspective, there is a certain logic to combining Sprint and T-Mobile US as the new larger business might be better positioned to tackle AT&T and Verizon Wireless, the two largest US carriers. However, he also explained that T-Mobile US is currently a strong company with a very strong brand and high levels of customer growth - although unsaid, Legere implied that T-Mobile US did not need the help in tackling the two bigger carriers. The company has been stealing customers from both AT&T and Verizon Wireless for some considerable time and is determined to change how the mobile industry works. Whilst Legere explained that the company would consider “various forms of consolidation” he finished his answer with, “but who knows. We’ll wait and see.” As such, it would seem that T-Mobile US might be considering their options, especially if the Trump administration might be more open to America’s four national carriers becoming three, but do not appear to have made any firm plans.
As for Sprint, it’s true that the business has been making progress. Legere said that he could see how Sprint might be bought by an existing cable operator to be used as a relatively quick and simple way into the cellular market. However, SoftBank have promised considerable investment into Sprint and last year, bought British semiconductor, ARM Holdings, rather than using this cash to prop up Sprint - which demonstrated a certain confidence in America’s smallest national carrier. Nevertheless, Legere’s prediction that 2017 will be a “year of craziness” in the mobile industry could spell trouble for the smallest and financially weakest American carrier. T-Mobile US may be reluctant to join with a weaker competitor to tackle the two bigger carriers.