Jeff Kagan: Sprint Needs Backup Plan If T-Mobile Merger Denied

Jeff Kagan  |

We have been discussing the potential T-Mobile US, Sprint merger for far too long. One way or another, a decision must be made. There are plenty of great arguments for and against the merger. So, will it be approved or blocked? If blocked, let’s take a look at what that means for the future look like for Sprint, T-Mobile and the wireless industry?.

Things have changed over time with regards to this merger attempt. Originally, I thought there was more of a reason to approve this deal. Now, that clarity is getting somewhat foggy. Follow me on this.

T-Mobile needs spectrum, Sprint needs marketing

Originally, T-Mobile [ (TMUS)] needed spectrum. Sprint [ (S)] has loads of spectrum. So, a deal made sense from that perspective.

Originally Sprint, after struggling for decades, needed marketing help. So, getting together with T-Mobile would be very helpful to them. The deal made sense from that perspective as well.

Bottom line, a merger would create a strong marketing company with loads of spectrum.

However, word was the deal would not be approved in this original format. That means concessions had to be made. That’s where things start to get foggy.

Now certainty of T-Mobile, Sprint merger is in question

On one hand, both T-Mobile and Sprint need each other. So, I thought they would do whatever was asked of them by regulators.

However, if T-Mobile and Sprint both have to carve away too much of what makes them successful, they may think the merger no longer makes sense.

So, will they still decide it is still in their best interests to merge if it means they will emerge as a smaller competitor? That’s the multibillion-dollar question.

Especially when this deal could be igniting growth from a new fourth place competitor, Dish Network [ (DISH)].

You see, this simple merger is getting quite complicated.

Which is more important to T-Mobile, Sprint: Revenue or spectrum?

If the two companies have to divest too much just to get the deal done, suddenly it may not be as attractive for either of them. So, they must weigh which is most important, revenue or spectrum?

That’s why, at this point, I would say the deal is getting shaky. If this deal is not completed, we may be about to see a repeat of the AT&T, T-Mobile merger attempt of several years ago.

You remember when that merger failed, AT&T [ (T)] had to give spectrum to T-Mobile to end the deal. This helped T-Mobile survive in the coming years, because they were running on empty with regards to spectrum at the time.

You see, at that time, T-Mobile was on their last legs. They missed the jump from 2G to 3G and were simply not a competitive player compared to AT&T, Verizon [ (VZ)] and Sprint. So, with some spectrum from AT&T, they had a chance. Now all they needed was real leadership.

When T-Mobile hired John Legere as CEO, they became successful

That’s when they hired John Legere as CEO, and he radically reinvented the dying business. T-Mobile has been growing ever since, and that is exactly what I think Sprint needs to do in order to save their company.

If Sprint can follow the T-Mobile path to success, they can have a stable and profitable future as well. Something they struggle to achieve today. Then again, that has always been the problem at Sprint.

So, what do they need to do exactly?

Looking at the T-Mobile path as an example, I think a management shakeup is necessary. They need new blood. New thinking. New ideas. New vision. Not the same old tired approach.

Sprint needs management and strategy shake-up like T-Mobile did

They need to look forward, not backward. They need to wrap their minds around what the wireless industry is evolving into, not what it was.

Going forward, the wireless industry looks very different. Yes, Verizon Wireless and AT&T Mobility will remain leaders in this space. And even though T-Mobile still struggles with little spectrum, with their marketing, they will remain a third-place player as well, with or without a merger.

Today there are a growing number of new competitors as well. Companies like Comcast Xfinity Mobile [ (CMCSA)] , Charter Spectrum Mobile [ (CHTR)], Altice Mobile [ (ATUS)] and others who are mobile virtual network operator (MVNO) resellers.

Dish Network has spectrum and needs to get into wireless in order to keep it. They are interested in acquiring what Sprint and T-Mobile would divest. This could suddenly create a new fourth place competitor.

There are also plenty of other companies with vision of tomorrow. Companies like Amazon [ (AMZN)], Facebook [ (FB)] and more.

Some of them have already tried and failed at wireless several years ago. But I believe they are getting ready for their next opportunity to re-enter the space.

Sprint needs to re-invent and re-design themselves in wireless

With all that said, Sprint needs to re-invent and re-design who they are in the wireless industry. There are several different areas including wireless to consumers and business customers, being a supplier of MVNO type services to other companies who want to enter wireless, and more.

Under Legere, over a few short years, T-Mobile has successfully resuscitated themselves and are now a strong and growing company in the 4G world. They are still a smaller competitor, and they need more spectrum to be successful in 5G, but they are heading in the right direction.

That’s exactly what Sprint needs to do if they are to remain a viable competitor going forward. They have plenty of spectrum, but not enough marketing pizzazz to make their dreams come true.

They need to hire their own Top Gun with regards to leadership and marketing. Someone who has the kind of spit and vinegar to punch their way onto the growth map like T-Mobile did with Legere.

This merger dance has been going on too long. It needs to come to a finale. Both T-Mobile and Sprint need to get on with building their businesses one way or another, together or separately. 5G is coming on strong, and neither company wants to miss this next train.


Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, Influencer, speaker and consultant. He follows wireless, wire line, telecom, Internet, pay TV, cable TV, IPTV, Cloud, Mobile Pay and communications technology. Email him at jeff@jeffKAGAN.com. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan.

Equities Contributor: Jeff Kagan

Source: Equities News

DISCLOSURE: The views and opinions expressed in this article are those of the author, and do not represent the views of equities.com.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
DISH DISH Network Corporation 40.85 -0.39 -0.95 1,117,318 Trade
FB Facebook Inc. 201.80 -2.04 -1.00 12,083,714 Trade
S Sprint Corporation 7.09 -0.13 -1.80 11,576,180 Trade
TMUS T-Mobile US Inc. 78.93 -0.11 -0.14 3,238,346 Trade
CHTR Charter Communications Inc. 414.56 -0.28 -0.07 460,019 Trade
VZ Verizon Communications Inc. 57.22 -0.19 -0.33 7,916,651 Trade
T AT&T Inc. 33.26 -0.32 -0.95 18,798,178 Trade
CMCSA Comcast Corporation Class A Common Stock 44.43 -0.66 -1.46 16,688,186 Trade
ATUS Altice USA Inc. Class A 25.80 0.13 0.51 5,021,624 Trade
AMZN Amazon.com Inc. 1,992.03 -17.87 -0.89 2,558,809 Trade

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