T-Mobile CEO Smooth-Talks Court on Promise of Sprint Merger

MANHATTAN (CN) – As the high-profile antitrust trial on the T-Mobile-Sprint merger reaches a midway point, T-Mobile CEO John Legere testified Friday that the company could have to hike customer prices if T-Mobile’s $26.5 billion deal to buy Sprint falls through.

A woman using a cellphone walks past T-Mobile and Sprint stores on April 27, 2010, in New York. (AP Photo/Mark Lennihan)

Appearing in a dark suit with a T-Mobile-accented magenta tie, the social media-savvy CEO said that raising prices to slow user growth and relieve stress on the T-Mobile network would be his “worst nightmare.”

T-Mobile’s proposed $26.5 billion merger with Sprint faces a bench trial in Manhattan where a coalition of states say shrinking the big-four wireless carriers down to three would result in higher prices for wireless customers, particularly for users of prepaid plans. In addition to New York and California, 11 other states and the District of Columbia have joined the challenge.

At trial before U.S. District Judge Victor Marrero, T-Mobile insists that the “supercharged” merged company would increase pressure on AT&T and Verizon to lower prices.

Legere’s testimony regarding T-Mobile’s potential pricing strategy Thursday stemmed from a September 2019 T-Mobile document that made projections about T- Mobile’s future as a standalone company in 2020.

A lawyer for the states, Glenn Pomerantz, laid out evidence that T-Mobile had options beyond acquiring Sprint that would let it obtain more spectrum, the airwaves that signals travel over, considered the lifeblood of a wireless network.

Adding spectrum capacity would shore up the network from the strain of its growing user base binging Netflix videos and uploading content to social media.

Pomerantz presented an email Legere sent in June 2015 saying that a potential acquisition of Dish “super-charges” T-Mobile, the same language T-Mobile has used to describe its Sprint deal.

Dish, like Sprint, has vast amounts of wireless spectrum, having spent $21 billion buying it.

Legere said he liked the possibilities of that deal but that T-Mobile wasn’t able to complete it.

On cross-examination by Pomerantz, the boastful CEO crowed that there are “tens of millions of subscribers of Sprint who can’t wait to be part of T-Mobile.”

U.S. District Judge Marrero pressed the witness Friday to explain why a post-merger T-Mobile wouldn’t just turn into the dominant market leaders he antagonizes, likening the self-styled un-carrier to “so-called flower children … the mavericks of the day” sprung from 1960s counterculture who later grew up to become “investment bankers on Wall Street.”

Would T-Mobile would hold back punches and not compete as actively if the transaction goes through, and the un-carrier “essentially become[s] one of the boys,” Marrero asked.

With a hint of underdog pride Friday afternoon, Legere called himself possibly the single-most hated man in the industry by AT&T and Verizon.

“That’s a club they wouldn’t let me join,” he said, adding that that T-Mobile compromising its signature ethos “would be the dumbest loss of gigantic value.”

As for the Big Two, Legere said, “I don’t see them playing nicey-nice with each other either.”

“Those two are quite aggressive with each other, and they’ve got the cable companies breathing down their necks,” he continued.

Legere was not optimistic for the fate of Sprint if the deal doesn’t go through.

“I think they’re in big trouble,” he said, speculating that since the company doesn’t have the same financial backing or the shareholder support that T-Mobile had prior its resurgence as the un-carrier, the company would likely be “sold for parts” without the merger.

Imagining a wireless industry landscape if the merger doesn’t go through, Legere noted there would be no supercharged Dish network, no expansion of nationwide 5G wireless penetrated rural markets.

“There won’t be this new in-home broadband competition,” he said. “If in fact there’s no transaction, competition will be less,” Legere insisted.

T-Mobile President and COO Mike Seivert testified as well Friday, explaining the merged entity would be able to close 3,000 retail stores and still have as many as Verizon, approximately 7,000 stores nationwide.

Seivert reiterated that the new T-Mobile would be competing against two big players, AT&T and Verizon, by offering the company’s “reliable low prices and a great quality network.”

“This is what we know how to do, and we’ll finally have the raw ingredients to do it at higher level,” he said.

The comparatively more buttoned-down Seivert will succeed the departing Legere as CEO after the conclusion of his contract on April 30, 2020.

Legere will remain a member of the board.

Earlier this week, a Sprint executive expressed a similarly dreary outlook for the company without the proposed takeover by T-Mobile, citing Sprint’s weak business prospects and lack of resources for network upgrades.

“Sprint would not be viable within the next two years,” Jay Bluhm, Sprint’s vice president of network development and engineering, said Wednesday.

University of California at Berkeley economics professor Carl Shapiro told the court in separate testimony that, following the merger, wireless customers could pay an extra $8.7 billion per year because of reduced competitive pressure.

From his expert analysis of the two companies’ head-to-head competition and their profit margins, Shapiro suggested that T-Mobile and Sprint subscribers would face a $4.6 billion in prices.

Sprint and T-Mobile expect the merger’s $43 billion worth of cost-saving synergies allow them to reduce cellphone bills and take more market share from AT&T and Verizon.

Sprint Chairman Marcelo Claure and Dish Network Corp. Chairman Charlie Ergen are expected to take the stand next week.

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