May 22, 2017 —
Representatives of T-Mobile promised at the 4th Annual MoffettNathanson Media & Communications Summit, held last week in New York, that any M&A activity would only be executed if shareholder value could be maximized. Then they engaged in a very convincing conversation about how good a Sprint hook up might be for shareholders.
Craig Moffett, senior research analyst, MoffettNathanson, interviewed three officials from T-Mobile, Braxton Carter, chief financial officer; Peter Ewans, corporate strategy; and Mike Sievert, chief operating officer.
When asked about M&A plans, the T-Mobile executives made it clear that if the carrier engaged in a merger, it would be coming from a position of strength with a high amount of confidence. Carter said that the carrier is happy with the performance of its brand, team and business model.
Led by outspoken John Legere, T-Mobile revels in its iconoclastic role as the outsider that forces change upon Verizon and AT&T. Nevertheless, merging with Sprint and becoming the third nationwide powerhouse looks enticing.
“Could there be an advantage in turbocharging our challenger position in the marketplace with increased capabilities from a potential partner through a merger or by combining in some way? Absolutely!” Sievert said. “There is a chance [that a merger would] enhance shareholder value on top of a business that is already performing well.”
Sievert reiterated the belief that both Charlie Ergen’s DISH Network and Sprint are both seeking a buildout partner, noting the impact of FCC buildout deadlines on the former and the “precarious” nature of the latter’s finances. Carter added that at the current pace Sprint’s 2.5 GHz rollout would take a decade.
“A combined company [T-Mobile/Sprint] would have the resources to put all that spectrum to work,” Sievert said. “We are really excited about the potential deals, potential value, potential synergies to unlock. We are going to work hard to see if anything needs to be done.
Sprint would be a “huge prize” in terms of hard synergies, which are primarily network driven, with a “treasure trove” of 2.5 GHz spectrum, according to Carter. The benefits of that type of scale, which could put T-Mobile on par with AT&T and Verizon, are hard to ignore.
“By truly creating a third scale national competitor, you can achieve the margin potential leveraging the fixed costs of the business that both AT&T and Verizon have,” Carter said. “Putting our networks together would truly give us the densification necessary to ubiquitously deploy that 2.5 GHz spectrum.”
Carter pointed to the successful Metro PCS merger as proof that the carrier could successfully combine its network with Sprint’s.
Toward the end of the interview, the T-Mobile panelists opened the M&A conversation to the wider sphere of possible players, including Comcast, Charter, Amazon and other “cable” providers.
“It is absurd to say that there are only four players in the [wireless] market,” Carter said. “There are multiple players coming, which will change the way the market is viewed from a regulatory standpoint.”
Carter ruminated on the shareholder value that would be created by a hook up of T-Mobile and Sprint with a coalition of Comcast and Charter.
“I totally believe in convergence. There is amazing potential,” he said. “It doesn’t matter if it is wireless or wired. The blending of those two models of business is going to change our world.”
Sievert noted that users do not care where they get their content from whether it is from wireless industry, cable industry or the media industry.
“They don’t care what you put in the ground ten years ago; they just want their content and they want it delivered everywhere. Our job is to create a mobile internet company,” he said.