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Sprint-T-Mobile merger questions: Will regulators OK it? And, Legere as CEO?

Matt Hamblen | June 6, 2014
With reports out this week that Sprint and T-Mobile US are planning to announce a $32 billion merger this summer, two big questions linger: Would federal regulators approve the deal? And would T-Mobile CEO John Legere run the combined company?

What about business customers?

Given their separate histories, will merging Sprint with T-Mobile make a difference for business customers?

Both AT&T and Verizon have more of the lucrative business accounts than either Sprint or T-Mobile, which could provide a growth opportunity for a combined entity.

However, Gartner analyst Bill Menezes said the proposed merger would have far more consumer benefits than it would for enterprises. Both companies target price-conscious, value customers for whom their current network insufficiencies aren't as important as they would be for corporate customers, who need consistent network robustness, coverage and reliability, he said.

"Combining Sprint and T-Mobile network and back office operations will be a complex, disruptive and expensive task," Menezes said. "There's no apparent benefit to corporate customers, including the many Sprint corporate customers who have weathered service disruptions during Sprint's recent Network Vision upgrades."

Instead, Menezes said a merger would mean that Sprint and T-Mobile "would be ceding the midsized and large enterprise market to AT&T and Verizon."

What about T-Mobile's 'un-carrier' tactics?

T-Mobile's brash "un-carrier" moves over the past year were mainly to win subscribers quickly to make the company attractive for a possible sale, so that record doesn't necessarily indicate how the company would perform post-merger.

In a recent interview with Business Insider, Legere said that T-Mobile was "dead" when he arrived and that he needed to be flamboyant and attack his competitors to get ahead, implying he was not getting the company ready for a sale.

Entner disagreed, and said that T-Mobile is "clearly setting itself up for sale, partly by driving customer gains through buying customers from other carriers and by buying their [early termination fees] for up to $600. That's not a behavior for the long run. They are burning through cash and that's not sustainable for the long run of T-Mobile and the industry overall."

Entner said the outcome of T-Mobile's actions could be disastrous, much like what happened in the 1990s during what was called the "long-distance wars," when carriers offered $50 to $200 to a consumer to switch carriers. "The consumer in the short run might enjoy it, but in the long run, it ruins the entire industry," he said.

Entner also said that Deutsche Telekom, which owns 66% of T-Mobile, "clearly wants to exit its ownership" stake in the U.S. company even though it would reportedly hold on to 15% to 20% of the combined entity, initially. He speculated that Softbank would buy out whatever remains of Deutsche Telecom in coming years as Softbank finds more cash to do so.

Would Legere become CEO of a combined Sprint-T-Mobile?

So what is Legere up to and would he become CEO of a combined Sprint-T-Mobile? Bloomberg News recently reported that a person familiar with the merger discussions said that Legere is the leading candidate to become the CEO of the combined company, while Hesse at Sprint said he wouldn't be bothered if he didn't get the job.


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