There were plenty of warnings about the possible negative effects of the proposed merger of T-Mobile and Sprint on rates, rural coverage and jobs during the House Telecom subcommittee hearing, “Protecting Consumers and Competition: An Examination of the T-Mobile/Sprint Merger.” But T-Mobile CEO John Legere, not surprisingly, held his own.
Chris Shelton, president, Communications Workers of America (CWA), said the merger would “kill American jobs, lower wages, and raise prices.”
CWA estimated that the merger will eliminate an estimated 30,000 jobs, 25,500 of which would be in retail stores. The Roosevelt Institute and the Economic Policy Institute predicted a decline in annual earnings between $520 and $3,276 for workers, according to Phillip Berenbroick, senior policy council, Public Knowledge.
Shelton noted that T-Mobile’s 2018 acquisition of iWireless, a regional carrier in Iowa, led to the closure of more than 72 percent of iWireless corporate stores, more than 93 percent of authorized dealer stores and the call centers in Des Moines and Cedar Rapids, Iowa.
Shelton predicted harm would come to employees of the carriers not even involved in the merger. “When you decrease competition for labor, wages go down. That is what will happen throughout the wireless industry at all the wireless carriers if the merger takes place,” he said.
The merger will harm rural carriers by removing a nationwide roaming option, according to Carri Bonnet, general counsel, Rural Wireless Association. She also called Legere’s pledge to freeze prices for three years “cold comfort.”
Legere repeated with relish his mantra that competition will increase, and the number of jobs will rise, saying he would add 600 new retail stores and five new customer experience centers.
“The capacity and scale and the power of the network that this merger will give us will really let me take it to the [AT&T and Verizon] and bring competition in a way that it has not been seen before,” Legere said. “I’m salivating to take it to the cable carriers, as well. This is about creating scale and capacity to super-charge the uncarrier to bring the duopolists kicking and screaming to what they should be doing in 5G.”
The New T-Mobile will need 3,600 additional employees in its first year and more than 11,000 more employees by 2024 than the standalone companies, Legere said.
“This merger will be a tremendous jobs creator at New T-Mobile and across the country,” Legere said. “Our merger will be jobs positive from day one – and going forward. The build-out of our 5G network, investment in new customer care centers, and expansion into new businesses like video distribution, broadband, and enterprise services means thousands more jobs than the two standalone companies would have needed.”
Legere denied claims that synergies from the merger would come from job losses, saying that “a significant amount of the synergy” would come through the decommissioning of 35,000 cell sites. “Together, we will have 110,000 macro nodes. We will pick 75,000 of them, build 10,000 more and the decommissioning of 35,000 cell sites,” he said.
Marcelo Claure, executive chairman, Sprint, said, considering that his company lost $25 billion during the last decade and currently has $40 billion in total debt, the merger is necessary for Sprint to continue to be competitive.
The post-merger T-Mobile will continue to be innovative, because its share of the market will continue to be small compared with AT&T and Verizon.
California Representative Anna Eshoo, who has signed a letter in support of the merger, asserted that the four-carrier market is not currently competitive, because AT&T and Verizon control roughly two thirds of the market and have had the same market share for the last 15 or so years. Creating a strong third carrier could change that, she said.
“This is hardly a dynamic, competitive market. For all intents and purposes, we have a duopoly. Americans pay some of the highest prices for wireless services in the developed world, have the least choice, especially in the rural areas,” she said.
Both companies are missing ingredients to become serious competitors in the market, according to Eshoo.
“T-Mobile has a strong record as competitor. I think we can all agree to that, but it lacks critical mid-band spectrum to compete,” she said. “That is where Sprint comes in. Spectrum is gold and Sprint has it. But Sprint has a $40 billion debt and cannot make the investment needed to compete with AT&T and Verizon.”
Doug Brake, director of broadband and spectrum policy, Information Technology and Innovation Foundation, spoke in favor of the merger, taking issue with those that want to preserve the four-carrier marketplace.
“The four-to-three lens ignores the rapidly differentiating business models in and adjacent to wireless services,” Brake said. “Raw connectivity is increasing commodified and wireless companies are looking to new revenue streams.”
The Sprint/T-Mobile merger had appeared to be sailing through judicial and FCC review. Now, however, with the Democrats taking over the House, Congress is exercising its oversight role. Energy and Commerce and Judiciary Committees plan to hold a joint hearing on the merger on Feb. 13 to exam the merger’s potential impacts on consumers, workers and the wireless industry.
“A merger between T-Mobile and Sprint would combine two of the four largest wireless carriers and the carriers with the largest numbers of low-income customers,” said Energy and Commerce Chairman Frank Pallone, Jr. (D-NJ).
While the complete list of hearing participants is still being confirmed, T-Mobile CEO John Legere and Sprint Executive Chairman Marcelo Claure have both agreed to testify.
This will be the first merger review hearing before the Energy and Commerce Committee in more than eight years—the last time Democrats held the majority in the House of Representatives.
“As the committees with oversight of the FCC and Department of Justice, we must hold this hearing to examine the effects on important issues like jobs, costs to consumers, innovation and competition,” Pallone said. “We look forward to examining this merger from the perspective of what is in the best interest of consumers and hardworking people.”
The merger was expected to close at the end of the second quarter of this year with the completion of reviews by U.S. Department of Justice and the FCC. There certainly may be conditions placed not the merger by those two agencies, if they approve it.
“Regarding the Sprint/T-Mobile merger, one sticking point was Deutsche Telekom [owner of T-Mobile] punting on Huawei as a condition. Softbank is already replacing them in Japan. Not sure how real this issue was. If this is a must have and DT won’t play, then the deal may be shot down,” said Earl Lum, analyst, EJL Research. “Any hearing is never good if it goes south so will need to wait and see what they say or DON’T say. I have to assume some spectrum will be given back as part of the deal.”
Calls for Merger Hearing Echoed in the Senate
Hearings may also be held on the Senate side. Senate Commerce, Science and Transportation Committee Chairman Roger Wicker (R- Miss.) and Ranking Member Maria Cantwell (D-Wash.) were urged schedule a hearing on the proposed merger in a letter by Senators Edward Markey (D-Mass.), Amy Klobuchar (D-Minn.), Tom Udall (D-N.M.), Tammy Baldwin (D-Wisc.), and Richard Blumenthal (D-Conn.), all members of the committee.
“The merger of T-Mobile and Sprint would reduce the number of nationwide wireless carriers from four to three,” according to the letter. “This reduction in competition raises a number of important questions that the committee should address.” The letter went on to note the possibility of harmful repercussions, such as “higher prices, fewer choices and less flexibility in switching carriers.”
The Senators went on to demand scrutiny of the 5G claims of T-Mobile and Sprint. “T-Mobile and Sprint have argued that their merger is necessary for successful deployment of a robust nationwide 5G network, despite previous individual assertions by each company made prior to the merger boasting of their own progress building towards 5G.”
T-Mobile, Sprint, if Joined, to Build 5 ‘Customer Experience Centers’
In what will certainly be a talking point during the hearings, T-Mobile and Sprint have announced that, upon the merger, they plan to build five new “Customer Experience Centers” around the United States, averaging 1,000 new jobs each.
The new centers will give customers more personalized support. Additionally, the companies plan to expand two existing T-Mobile Centers, cumulatively creating up to 5,600 additional American customer care jobs by 2021.
Overland Park, Kansas, will be the first of the five new locations. The Overland Park facility will be a new addition to the existing Sprint campus, which was previously announced as the New T-Mobile’s secondary headquarters.
Last week in a Bloomberg feed there was an article about Sprint throttling Microsoft’s Skype Service. According to a study by Northeastern University and the University of Massachusetts, Sprint has been slowing traffic to Microsoft Corp.’s Internet-based video chat service Skype.
How did they find out? Well, as it turns out there is an app for that. It is called WeHe and it is designed specifically to determine if your ISP is throttling services. At present, it can test the streaming speeds of seven popular apps, YouTube, Amazon, NBC Sports, Netflix, Skype, Spotify, and Vimeo, and then tell you which of them are being artificially slowed down by your internet provider.
According to the Bloomberg report, more than 100,000 consumers have used the Wehe smartphone app to test internet connections. Information from those tests is then aggregated and analyzed by the researchers to check if data speeds are being slowed or throttled.
Interestingly, Sprint was the only one to throttle Skype, the study found. The throttling was detected in 34 percent of 1,968 full tests – defined as those in which a user ran two tests in a row – conducted between January 18 and October 15, 2018. It happened regularly and was spread geographically across the United States. Android phone users were more affected than owners of Apple’s iPhones.
What is interesting, and rather ironic is that Skype is in bed with Sprint. Seems Sprint is biting the hand that feeds it.
However, all analysis aside, this is the perfect example of why Net Neutrality (NN) should be reinstated and why such companies need babysitting. Of course, a spokesperson from Sprint said that Skype was not singled out, nor do they single out any particular content provider. Of course not. It was just all just a misunderstanding … right. They got caught with their hand in the cookie jar and true to unregulated corporate style, disclaimed any such practice.
The researchers bought a Sprint wireless plan to try to detect throttling of Skype in the lab but couldn’t replicate the experience of the Wehe app users. This is likely because it affects only certain subscription plans, but not the one the researchers purchased, they said.
And, as can be expected, Sprint is not the only provider that was found to practice throttling. Earlier this year, the same researchers found that most of the large American telecoms were throttling popular apps including Netflix and YouTube.
What I love about this is that the work of these researchers is funded by the National Science Foundation, Alphabet and ARCEP, the French telecom regulator. I can see why NSF and ARCEP would be interested in such a study; not sure why Alphabet (Google’s parent company) would be unless they are looking for some dirt on the other players.
In any event, another blatant, in your face, “we say one thing and do another.” I continue to be disappointed in the FCC with their refusals to come up with something to keep these telcos in line and protect the consumer. That is what they are there for, after all. It is again made clear that, without some sort of regulation, telcos will continue to go about their business, as usual, whether that business is moral and/or legal, or not, seems to not be much of a concern to them.
Fortunately, at least some of the states are realizing that the current administration has no interest, and apparently, concern in protecting the consumer so they are implementing their own rules on broadband providers.
Ajit Pai, the FCC’s Trump-retained chairman believes that it is not the federal government’s job to babysit telcos and content providers. OK, then why did they promptly sue California over its moving forward to implement its own version of NN? That has since been vacated by California, for the time being, in exchange for the Justice Department’s agreement to postpone its litigation against the state until a separate case directly involving the FCC runs its course.
The time has come to figure this out. Be it at a federal level, or lower, something needs to be done. This is the latest in a long line of similar instances. It is obvious that the broadband providers, telcos and others, will just continue the status quo unless they are babysat.
Sprint doubled its network capex year-over-year up to $1.3 billion in the second quarter of its 2018 fiscal year as it increased the capacity of its network while still cutting costs by $100 million year over year, according to company officials in a Seeking Alpha transcript.
Sprint is in the middle of a two-to-three year burst of capex spend to cover the deployment of 2.5 GHz and nextgen technology. By improving its network, Sprint hopes to lower its churn, which is one of the highest in the industry, according to Michel Combes, Sprint CEO.
“So, with these 2.5 GHz deployments, what I expect the most is that it will help us to close the gap from a churn point of view and then our net adds profile should be much better,” Combes said. “Thanks to all of the investment we have done, we have been able to provide LTE Advanced on a nationwide basis.”
Sprint completed thousands of tri-band (850MHz / 1.9 GHz / 2.5GHz) upgrades during the quarter and now has 2.5 GHz spectrum deployed on 70 percent of its macro sites up from 50 percent year over year. Adding thousands of outdoor small cells, the carrier now has deployed 21,000 mini macros and strand mounts. Additionally, it continued commercial deployment of Massive MIMO radios, which increase the speed and capacity of the LTE network.
T-Mobile Rolls Out 600 MHz at ‘Furious’ Pace, Preps for 5G
Driven by the 600 MHz rollout, T-Mobile’s spent $1.4 billion on capex in the third quarter, with full year capex numbers expected at the high end of the carrier’s guidance range of $4.9 billion to $5.3 billion. As a result, so far, T-Mobile has deployed 600 MHz in 1,500 cities across 37 states, including Puerto Rico, or 291 million pops, according to John Legere, T-Mobile CEO in a Seeking Alpha transcript.
“We continue to expand coverage with industry leading performance,” Legere said. “We continue to aggressively roll out low-band spectrum, with our 700 MHz deployment virtually complete and our 600 MHz deployment continuing at a furious pace.”
All of the 600 MHz network hardware that T-Mobile is deploying is upgradeable to 5G with a software update. Plus, it plans to have global standards-based 5G equipment deployed in six of the top 10 markets, including New York and Los Angeles, by the end of the year so that the network will be ready for the introduction of the 5G smartphones in 2019, according to Legere.
“We plan on the delivery of a nationwide 5G network in 2020 and we’re building 5G with global standards-based equipment, the true 5G. And through our pending merger with Sprint, we will be able to deliver a 5G performance capability well beyond what either company can deliver on a standalone basis,” Legere said. “I mean, obviously, we are incredibly focused on the combination with Sprint and the 5G opportunity. We can deliver through that combination is unique. It’s incredibly compelling. It’s going to bring a level of 5G capability and service to the U.S. market that nobody can do on their own.”
John Legere always talks a good game. Sometimes it is tough separating the hype from reality, however. Last week, he continued to make his case for T-Mobile’s merger with Sprint, promising faster speeds, lower costs and increased employment in a blog. The merged company will invest nearly $40 billion and will have spectrum and capacity needed for a “broad and deep” nationwide 5G network, the T-Mobile CEO said. Rural coverage will be a big emphasis, he said, which should get the support of Congress.
He said the merged company will provide 5G speeds that are five times faster than the LTE speeds by 2021, while increasing LTE speeds.
“At full deployment the New T-Mobile will deliver fiber-like speeds. I’m talking about average speeds at a blazing 444 Mbps, covering about two-thirds of the country, with jaw-dropping peak speeds up to 4.1 Gbps!!” Legere said.
One of the merger tests that the New T-Mobile must pass is whether their marriage of the two wireless companies will reduce competition and increase costs to the consumer. Legere held that costs will actually go down.
“Analysis by renowned economist Dr. David Evans concludes that the building of the New T-Mobile 5G network will provoke competitive responses from Verizon and AT&T that will result in a decrease in the cost of a gigabit of up to 55 percent and over a 120 percent increase in mobile data supply for all wireless customers,” he said.
Addressing concerns that large swathes of America are unserved or underserved, he said that the merger will result in mobile broadband speeds in excess of 100 Mbps to roughly two-thirds of the population in just a few years and 90 percent of the country by 2024.
“This deal enables New T-Mobile to increase coverage in rural America and create more competition for wireless, broadband and beyond. Case in point: we estimate that 20-25 percent of those new broadband subscribers will be located in rural areas,” Legere said.
As opposed reducing jobs, which most mergers do through taking advantage of synergies, Legere plans on creating 3,000 direct jobs in the first year, increasing to more than 9,600 direct and indirect jobs by 2021 and more than 11,000 by 2024.
“Every day we will have more jobs as the New T-Mobile than the two stand-alone companies would have on their own,” he said. “As we build out our new 5G network and bring these services to all parts of the country we will create thousands of job opportunities.”
No one knows if the Federal Trade Commission will okay the merger, but Legere checks all the boxes that regulators will scrutinize. The merger will increase competition with Verizon and AT&T, he said, lowering consumer costs and establishing competition in rural areas, in places where it doesn’t exist today. And increased employment would be the frosting on the cake. For the wireless infrastructure industry, the promise of a $40 billion capex infusion might be enough to take the sting out of the planned decrease in towers.