Sprint Reportedly Bowing Out of T-Mobile Bid (was "Sprint offer" and "Iliad" threads)

[bigsnake49]

Really?  Considering the margins in the wireless industry, I would argue that there is plenty reason to assume that 4 national carriers can actually survive.

 

 

If you are trying to sell to a regulatory agency, what else are you going to say?  That you really want to buy T-Mobile so you can have higher margins and complete much more comfortably by taking out your closest competitor?  Son is trying to sell this deal to regulatory agencies - take what he says through the lens of a regulatory agency coming from a competitive businessman.  He is looking out for his shareholders.

 

As for AT&T and Verizon - they would probably support a merger.  New AWS up for grabs and a comfortable/predictable landscape for the bells to compete in.  Like I said - you would have them comfortable at their 40-50% margins while softbank/sprint would slot just below that.  The current size of the duopoly would make them stick with their current margins while keeping sprint just below them.

 

I don't think it is harder for Sprint/T-Mobile to take on the duopoly.  I think T-Mobile's current quarter of record low churn, insane adds, and 20% adjusted ebitda margins shows that you can take on the duopoly while not needing to consolidate.

 

If you are a sprint/softbank shareholder, no doubt you would want T-Mobile to merge with Sprint as the entire wireless industry in the US would become more profitable.  If you are a customer, I don't think you would see much disruption.

 

Just my humble opinion based on profit margins, size of Sprint and T-Mobile, and how much they can do to attract customers.

20%EBITDA. How long do you think that shareholders or parent companies would put up with that? Yeah the two could survive on that, but could never thrive. You need 35-40% at least to thrive and to pay off the kind of debt load that Sprint has. That's why Sprint should have acquired T-Mobile before the two began their LTE deployment. The two could have shared the network buildout costs.

Edited May 1, 2014 by bigsnake49

[irev210]

20%EBITDA. How long do you think that shareholders or parent companies would put up with that?

 

TMUS stock has doubled in 12 months, seems like shareholders are loving it.

[bigsnake49]

TMUS stock has doubled in 12 months, seems like shareholders are loving it.

Only because they think that there is an increased possibility that Sprint will acquire them.

[centermedic]

NUMBER NERDS FIGHT!

[irev210]

Your cherry picking here. You can't look at arpu and say they are lowering price because the new arpu doesn't include handset subsidies( a year ago a much higher portion of their customers where on older plans that included subsidies). When you add the cost of equipment that customers now have to pay that is worth over 4 dollars. Further The problem with editda is that it ignores the ongoing capital costs in a very capital intense business. This is where the merger makes sense to me. The larger companies have a huge advantage in being able to spread the fix costs over a larger sub base.

 

Completely agree that combined they would have a larger base of customers to spread fixed costs.  That is the same reason why AT&T and Verizon have insane margins.

 

I think that would just mean Sprint/T-Mobile would slot in below AT&T/VZN and not really save customers money.  No doubt it would be great for Son/Softbank/Sprint to making more profit in the US but as a customer I want better value.

 

Only because they think that there is an increased possibility that Sprint will acquire them.

 

that's definitely some of it - shareholders would expect sprint/softbank to pay a premium to be acquired.

[irev210]

20%EBITDA. How long do you think that shareholders or parent companies would put up with that? Yeah the two could survive on that, but could never thrive. You need 35-40% at least to thrive and to pay off the kind of debt load that Sprint has. That's why Sprint should have acquired T-Mobile before the two began their LTE deployment. The two could have shared the network buildout costs.

 

It's a good question.  Do some research - 40% ebitda margins are not the norm.

 

Granted, telecom industry is very capex heavy, so you need reward.  Plus, the barriers to entry are very high.

 

As a customer, I want good price (low margins).  You get low margins with high levels of competition.  Less competition means higher margins which means higher prices.

[Mondays In Flames]

As a current TMO, and prior Sprint, customer here are my two cents:

 

I like the fact that I have LTE virtually everywhere I am with TMO, but I dislike the fact that once I'm outside of city limits the coverage does drop, where with Sprint I had coverage well into the everglades. Then again I am largely a city dweller. It's also nice that even when I'm not on LTE, the speeds are consistently great, whereas with Sprint 3G was completely abysmal. Never could load anything, and it was infuriating to pay the $10 premium data fee. While Sprint does have more reliable voice coverage, I find that TMO is adequate, with only two or three dead spots in Miami (where I normally am driving through).

 

Should both companies combine and make one giant, ultimate uncarrier mashup (clusterfuck?) behemoth that can bring down AT&T and Verizon? Sure why not? But I would not like to lose the benefits I currently have with TMO, and pay the higher prices I once did with Sprint. If they can pull it off in a way that is consumer friendly towards both companies customers that would be great. Ultimately, I would love to have Sprints Voice coverage with TMO's fast data.

 

(I hope this post in no way violates the rules, it's a personal opinion)

 

 

-Luis

[Conan Kudo]

It's a good question.  Do some research - 40% ebitda margins are not the norm.

 

Granted, telecom industry is very capex heavy, so you need reward.  Plus, the barriers to entry are very high.

 

As a customer, I want good price (low margins).  You get low margins with high levels of competition.  Less competition means higher margins which means higher prices.

Most of the world's telcos operate with margins below 20%. The telcos in richer countries typically go up to 30-35%. AT&T/VZW are quite unusual with the margins they have. In fact, if they followed proper business investment practices, they would probably be in line with the rest of the world.

[JimBob]

Does not a combined SprinT-Mobile have to lower prices and better its network in order to crack at dethroning AT&T + Verizon? I do not immediately see how a merger will not deliver value to consumers.

 

Cheap is great, but I am willing to later pay more for quality service.

[Conan Kudo]

Does not a combined SprinT-Mobile have to lower prices and better its network in order to crack at dethroning AT&T + Verizon? I do not immediately see how a merger will not deliver value to consumers.

 

Cheap is great, but I am willing to later pay more for quality service.

No. Both operators use completely different network architectures and systems, making it difficult to make integration work. The only way to make integration work quickly is to shift to one of the two architectures immediately and discontinue access to the other. Given the economic scale, it would most likely be the Sprint architecture that is retired (which even I don't want).

[milan03]

Does not a combined SprinT-Mobile have to lower prices and better its network in order to crack at dethroning AT&T + Verizon? I do not immediately see how a merger will not deliver value to consumers.

 

Cheap is great, but I am willing to later pay more for quality service.

Sprint should better it's network without a merger. Merger itself would only diminish the competitiveness in the wireless market, and only slow down network advancements on both networks. Not to mention the repercussions going into 600MHz auction.

[utiz4321]

The narrative that four carriers have Done anything to reduce price for consumers is something that can be substituted. There has been a shift in how the wireless industry opperates but not in the end price the average consumer pays.

 

The arguemsnt Softbank is making is that we have a duopoly that drive the industry and has all of the industry's profits. By creating a third player with the same scale you are turning a duopoly in to a three players oligopoly. I am starting to by the idea.

[hescominsoon]

I saw that just now, so I jumped to S4GRU to say a little something.

 

Looks like I'm just in time! I think that the horde of Magenta agents blind to T-Mobile's future shortcomings, and the Sprint Haters of the world will make it very difficult for us Sprint fighters/loyalists to out-speak their banshee yells when the FCC files public comments.

 

I'm in college, so I think I can make a well-rounded 20,000 word report/essay in support of the merger.

 

Even though we'll probably be outnumbered 10-01 in the number of comments that will be submitted by the public, I hope that sound reason and logic will give the FCC enough reason to allow this to happen.

Sprint grabbing another incompatible network?  did nobody learn from the nextel disaster?  I hope this gets stuffed.

[hescominsoon]

I am for this merger. I was reading everyone's opinion on it and my response to it is that Sprint cannot just simply focus on its own network with the money it is planning to use to merge, but the point of the merge is in order to get that scale for the number of towers. When Masayoshi Son talks about scale, it is in order to have the physical towers to compete with the big two. Also, for potential bidding for the 600mhz would be a lot easier with only three companies bidding instead of four in total. I don't this is my own opinion, not bashing on anyone. Just putting it the thought out there for people against it. Also, for business, I can see John Legere being the CEO because he is the face and how he puts himself out there. Making himself the marketing campaign.

sprint has plenty of towers...they waster YEARS screwing around with nextel..time that could have been spent getting 1099 LTE off hte ground.  NOw they ahve NV 1 and 2 and etc etc...nv1 isn't even done yet.  Once sprint gets 800/1900/2600 LTE on their entire network they won't need tmob's patchwork spectruma nd incompatible GSM network..they'll have one that run circles around it..if they ever stop to get it finished.

[hescominsoon]

Really?  Considering the margins in the wireless industry, I would argue that there is plenty reason to assume that 4 national carriers can actually survive.

 

 

If you are trying to sell to a regulatory agency, what else are you going to say?  That you really want to buy T-Mobile so you can have higher margins and complete much more comfortably by taking out your closest competitor?  Son is trying to sell this deal to regulatory agencies - take what he says through the lens of a regulatory agency coming from a competitive businessman.  He is looking out for his shareholders.

 

As for AT&T and Verizon - they would probably support a merger.  New AWS up for grabs and a comfortable/predictable landscape for the bells to compete in.  Like I said - you would have them comfortable at their 40-50% margins while softbank/sprint would slot just below that.  The current size of the duopoly would make them stick with their current margins while keeping sprint just below them.

 

I don't think it is harder for Sprint/T-Mobile to take on the duopoly.  I think T-Mobile's current quarter of record low churn, insane adds, and 20% adjusted ebitda margins shows that you can take on the duopoly while not needing to consolidate.

 

If you are a sprint/softbank shareholder, no doubt you would want T-Mobile to merge with Sprint as the entire wireless industry in the US would become more profitable.  If you are a customer, I don't think you would see much disruption.

 

Just my humble opinion based on profit margins, size of Sprint and T-Mobile, and how much they can do to attract customers.

Once these folks start figuring out it's another nextel/sprint combo those adds will stop in a hurry.  Torpedo this plan Son..if you want another CEO you don't need to pay him 40 billion to acquire his company...frankly i wouldn't legere anyway.

[lordsutch]

Honestly if the plan is to compete on a nationwide basis with AT&T and Verizon, T-Mobile doesn't get you there; there's so little non-overlap in footprint that SprinTMobile's not going to be a truly national carrier. If the concern is that AT&T and Verizon are going to buy out the CCA, then the smart play for Son is to buy those carriers out and build out the smaller urban/suburban centers and major highway corridors they don't cover.

 

The one thing T-Mobile has is a lot of customers... but they're customers that are likely to bolt the second Sprint tries to move them onto CDMA and/or AT&T and Verizon decide to get serious about price competitiveness. Plus the time to buy was before Legere's pump-and-dump strategy was underway; the "uncarrier" customers are easy pickings for AT&T in particular, who can put them onto nuCricket with nothing more than a SIM swap (with no need to pay ETFs).

[S4GRU]

Plus the time to buy was before Legere's pump-and-dump strategy was underway; the "uncarrier" customers are easy pickings for AT&T in particular, who can put them onto nuCricket with nothing more than a SIM swap (with no need to pay ETFs).

 

^^ THIS ^^

[irev210]

^^ THIS ^^

I thought that churn would tick up with these etf promos but that hasn't happened. I just can't figure out how churn is so low.

[bigsnake49]

Sprint should better it's network without a merger. Merger itself would only diminish the competitiveness in the wireless market, and only slow down network advancements on both networks. Not to mention the repercussions going into 600MHz auction.

I don't think it will slow advancements on either of the networks. By the time it closes both networks, will be substantially complete.

[bigsnake49]

Honestly if the plan is to compete on a nationwide basis with AT&T and Verizon, T-Mobile doesn't get you there; there's so little non-overlap in footprint that SprinTMobile's not going to be a truly national carrier. If the concern is that AT&T and Verizon are going to buy out the CCA, then the smart play for Son is to buy those carriers out and build out the smaller urban/suburban centers and major highway corridors they don't cover.

 

The one thing T-Mobile has is a lot of customers... but they're customers that are likely to bolt the second Sprint tries to move them onto CDMA and/or AT&T and Verizon decide to get serious about price competitiveness. Plus the time to buy was before Legere's pump-and-dump strategy was underway; the "uncarrier" customers are easy pickings for AT&T in particular, who can put them onto nuCricket with nothing more than a SIM swap (with no need to pay ETFs).

Who says that they have to move them into CDMA? They can contninue using HSPA+.

[bigsnake49]

Once these folks start figuring out it's another nextel/sprint combo those adds will stop in a hurry.  Torpedo this plan Son..if you want another CEO you don't need to pay him 40 billion to acquire his company...frankly i wouldn't legere anyway.

It will be nothing like nextel Sprint. Both networks are running LTE. That's where the integration will happen. 

[milan03]

I don't think it will slow advancements on either of the networks. By the time it closes both networks, will be substantially complete.

Just remember what AT&T merger did to T-Mobile network deployment.

[hescominsoon]

It will be nothing like nextel Sprint. Both networks are running LTE. That's where the integration will happen. 

they aren't using LTE for Voice AND data..so you still ahve two networks you have to manage because voice and data are on two incompatible technologies...sprint+tmob=nextel disaster again.

[runagun]

Is that before or after Fcc came out against it?  $6B was a good hunk of change that really propelled T Mobile's reenergized network investments. DT at the time gave up on spending money on the network. They won't do that again.

Just remember what AT&T merger did to T-Mobile network deployment.

[runagun]

Theres two major differences.  First, Iden was a orphan technology.  Second, Network Vision is in play.   

they aren't using LTE for Voice AND data..so you still ahve two networks you have to manage because voice and data are on two incompatible technologies...sprint+tmob=nextel disaster again.