T-Mobile customer friendly ways could keep SoftBank away

Posted: January 16, 2014 in Uncategorized
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With recent talk suggesting that SoftBank is ready to bid for T-Mobile, U.S. regulators might not be so quick to approve such a deal. Right now, T-Mobile is keeping the industry in the U.S. honest thanks to its consumer friendly attitude, which has resulted in the nation’s fourth largest carrier being its most innovative. Call it the tail wagging the dog if you’d like, but T-Mobile was the operator that started the others on a path toward unsubsidized equipment sales and the end of the two-year contract. T-Mobile is the only one of the four major U.S. carriers that actually has completely done away with subsidized pricing.

T-Mobile also was the first to allow annual phone upgrades, and while the other major carriers tried to catch up with T-Mobile, only the latter offers multiple upgrades in a single year. Other “firsts” credited to the carrier include eliminating data roaming charges for its customers in over 100 countries and offering tablet users 200MB of free data a month for life. In its most recent promotion, T-Mobile will give those who switch to them from Verizon,Sprint and T-Mobile, a $300 credit toward a new phone and will also pay the ETF that is charged to those who break a two-year contract with one of the other three major carriers. All of this innovation has paid off. Over the last two quarters, the company has gained over 1.8 million new subscribers and is adding two new subscribers for each one it loses to AT&T.

It is these consumer friendly actions that would make U.S. regulators think twice before giving approval to an offer to buy T-Mobile. If Sprint (78% owned by SoftBank) and T-Mobile merge, most believe it would end the latter’s innovative ways. Roger Entner, an analyst at Massachusetts based Recon Analytics questions why regulators would even allow a slow moving company like Sprint to purchase a fast mover like T-Mobile. The answer to that question has to do with the amount of spectrum each of the carriers own. A Sprint-T-Mobile combination would still have fewer customers than Verizon and AT&T, but would have twice the spectrum owned by the top two U.S. mobile operators.

“The national wireless market is experiencing a new and refreshing bout of vigorous price and service competition. If Sprint and T-Mobile merge, however, this dynamism may end prematurely.”-Albert Foer,president, American Antitrust Institute

While SoftBank has been scouring the financial world, looking for financing for a T-Mobile bid, the executives at T-Mobile are helpless to prevent a deal from happening. Even outspoken T-Mobile CEO John Legere, who has symbolized the company’s emergence with his witty attacks on rivals and his pro-consumer attitude, can’t stop a deal from happening. Germany’s Deutsche Telekom owns the vast majority of T-Mobile. If another company makes a deal with them to buy the telecom firm’s shares in T-Mobile, the deal could only be halted by U.S. regulators.

The Justice Department and the FCC would have to both sign off on a deal to buy T-Mobile. It was the Justice Department’s decision to fight AT&T that forced the number two carrier to pull out of its $39 billion deal to buy T-Mobile in 2011. As a result of pulling out of the acquisition, AT&T had to give T-Mobile some spectrum and $3 billion in cash, which ironically helped make T-Mobile the force to be reckoned with that it is today. And while the Justice Department might seem desirous of keeping the competitive status quo, one former Justice Department antitrust attorney says that an argument could be made otherwise. Allen Grunes, now in private practice, believes that Sprint and T-Mobile could make a case for approval of a merger by saying that the two carriers combined would be a more “effective” competitor to Verizon and AT&T.

source: Bloomberg

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