Sprint and T-Mobile are continuing their unlikely flirtation, despite all evidence pointing to regulators squashing any attempt to merge.
Sprint has started meeting with banks to arrange financing for a potential purchase, and T-Mobile Chief Executive John Legere this week sang the praises of consolidation as a way to increase competition. “When you play this game over five years or so, there are capital requirements, and ways to catch up with the big guys,” he said in an earnings call. “We’ve always said, at some point, in terms of the industry, it’s a consolidation game.” Legere didn’t mention Sprint specifically, and he took pains to say that he was also discussing potential deals with smaller companies.
It was a strange forum to discuss his company’s need for help competing. Legere’s confident crowing has become his calling card, and he had plenty to boast about. T-Mobile added 1.3 million new monthly subscribers this quarter, far exceeding expectations and outpacing the growth of all of its major competitors combined. But the company also reported a net loss of $151 million. “This is a short-term trade worth making,” said Legere.
Longer-term, though, Legere argues that T-Mobile will have trouble competing against behemoths like AT&T and Verizon. A major issue is access to the airwaves, which the wireless companies need to build out their networks. T-Mobile actually completed a major deal with Verizon to help it do so earlier this year. But over the next five years, Legere says that Verizon and AT&T are likely to try to consolidate control over the airwaves in order to squeeze out competition.
Tom Wheeler, the Federal Communication Commission’s chairman, has been largely focused on how to dole out access to the airwaves since taking office late last year. Legere says that the FCC will take a “fair look at consolidation” once it has dealt with issues related to spectrum. He seems to think that the question of how many competitors is too few is still up for debate. This is not a widely held view. Regulators have said repeatedly that they would prefer to have a wireless market with four major competitors.
