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Thread: Sprint Merger: T-Mobile promises not to raise prices for 3 years

  1. #31
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    Quote Originally Posted by actinic View Post
    No, just makes a bad investment cheaper. T-Mobile would be better off walking, save their acquisitions costs, and pick up assets from a Sprint bankruptcy sale if need be, primarily spectrum. Frankly there's no need or urgency for T-Mobile to purchase Sprint whatsoever .. they're doing just fine.
    In a bankruptcy sale you'd have Verizon and AT&T bidding up the cost of the assets.

    Sprint, once you ignore the one-time expenditures, isn't losing money. They aren't going bankrupt. Their churn is very high because of customers leaving after promotional offers have expired, yet without the promotional pricing there's little reason to stay. Still, as an independent company they can't afford to compete over the long term.

  2. #32
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    Quote Originally Posted by smsgator View Post
    Sprint as a standalone company is history. They do have a lot of spectrum. Should the merger not go through then they would still be an attractive takeover target for a deep-pocketed company like Google or Comcast that would be willing to build Sprint into a top tier mobile carrier. The Xfinity/Verizon connection is tenuous. .
    Google and Comcast already said no to a merger with Sprint that sold for just $26B to T-Mobile. Google will never buy any network much less the #4 network since it would cause the other three networks to compete against the Android OS. They Could even reuse to sell Android phones or jack up the price or lower their support of Android phones as they get in bed with Apple. Google that owns the Android OS can't be in competition as a network directly as a major network. That is why Google Fi is a MVNO that has a very limited amount of customers and you don't see Google pusing Fi as a major product in it's advertising. The major networks put up with Google Fi MVNO since it is a test bed that builds and test new technology to put into Android.

    Comcast and Charter both said no to Sprint. Both Comcast & Charter use millions of their WiFi Hotspots for service that carry about 80% of their networks data and voice calls. Verizon is a Roaming network to both Comcast and Charter and nothing more. Both Charter and Comcast don't want a National Network they want a small side business to use to bundle their current customers. Please provide a link where Xfinity/Verizon connection is tenuous since I have never seen any issues.

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    Quote Originally Posted by shilohcane View Post
    Google and Comcast already said no to a merger with Sprint that sold for just $26B to T-Mobile....
    Also, another buyer for Sprint would just get the buyer Sprint. Sprint is not a competitive national network and has only been marginally profitable recently. Another buyer would have to plan on spending massive amounts of money to expand Sprint to a competitive network - all in a nearly saturated cell service market.

    Verizon and AT&T have each outspent Sprint in capex by about 50 billion dollars in the past decade to get to where they are.

    The true cost to another buyer to build Sprint to a competitive network with hopes of a profitable ROI is more like $50-75 billion.

    I believe this explains why no one else is interested and it is very unlikely to happen.

  4. #34
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    Quote Originally Posted by cellphone-guy View Post
    A combined Sprint/T-Mobile will create MORE competition, not less. It still boggles my mind how anyone could think otherwise.

    If you're entering a car race against a Lamborghini, would it benefit you to have two Volkswagens or another Lamborghini. Quantity doesn't equal quality or ability to compete.

    I've been behind this merger all the way, so I hope it goes through quickly. Eventually it will lead to better competition amongst cable/content providers as well.

    Let's get this done already!

    Sent from my Z982 using HoFo mobile app
    Interesting analogy. I've made similar ones in *opposition* to the merger.

    You're looking at it solely from a network quality angle. Sure- in your race, I'd rather be driving a Lamborghini. But as a consumer going to the car dealership to buy a new car, I'm far more likely to be able to afford a Volkswagen.

    I've been a T-Mo customer since Jamie Lee Curtis was hawking Voicestream, so I've seen T-Mo's network grow from bare bones to something a lot closer to a Tier 1 provider. However, their prices for new customers is far closer to Tier 1 pricing than it ever has been.

    The counter argument to "we need another tier 1 carrier" is "we already have two". T-Mo and Sprint's merger does (potentially) create a third tier 1 carrier, and adds a bit of increased competition there, but it obliterates tier 2 entirely. If McDonald's, BK, Wendy's and Taco Bell suddenly mergered into a single $12/plate competitor to Applebees, Chili's and TGI Fridays, I wouldn't say "Yea! More competition in the casual sit-down restaurant category!", I'd say "Crap! Where am I going to get a $5 lunch now?"

    I find all of the T-Mo fanboyism here amusing, but ask you all a thoughtful question: would you all still be so in favor of this merger if T-Mo also announced that due to the costs and work involved in merging the two networks, all grandfathered plans would have to be cancelled, and all existing customers would have to pay the current T-Mo One rates to continue with the new T-Mobile?

    It's easy to be in favor of anything you might benefit from if you don't actually have to pay for those benefits.

    The fact that T-Mo has promised they wont raise rates for 3 years post-merger is really just a promise that they'll raise rates in exactly 3 years and 1 day, just like when DISH, DirecTV or cable companies tout a plan with a price "guaranteed for two years!", you know you'll feel the pain when the two years are up!

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    Quote Originally Posted by smsgator View Post
    In a bankruptcy sale you'd have Verizon and AT&T bidding up the cost of the assets.
    A $26B asset markup? Highly unlikely. By the time the sale takes place any hardware related assets will have depreciated further leaving spectrum as the primary asset. The remaining 3 split spectrum purchase at bankruptcy auction. If T-Mobile needs the funds to compete they're at least $26B richer with a then larger subscriber base less the hardware costs forgone by not purchasing Sprint.

    Time is T-Mobile's ally.

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    Quote Originally Posted by smsgator View Post
    In a bankruptcy sale you'd have Verizon and AT&T bidding up the cost of the assets.

    Sprint, once you ignore the one-time expenditures, isn't losing money. They aren't going bankrupt. Their churn is very high because of customers leaving after promotional offers have expired, yet without the promotional pricing there's little reason to stay. Still, as an independent company they can't afford to compete over the long term.
    Really... Sprint had a net loss of $343 million or $0.03 loss per stock share. Also, sounds like Sprint's past profits last year were due to Tax Reform.

    " The current quarter had several non-recurring items, including $105 million related to a loss on asset dispositions, $67 million related to merger costs, $50 million related to a litigation settlement, and $30 million of severance and lease exit costs. These led to a net loss of $343 million compared to net income of $7.2 billion in the year-ago quarter. However, as a reminder, we had a $7.1 billion non-cash benefit from tax reform included in last year's results. "

    Turning to slide 11 on CapEx and free cash flow. Network cash capital expenditures of $1.4 billion more than doubled year-over-year and were up roughly $150 million sequentially as we continue to execute our Next-Gen Network plan. As expected, adjusted free cash flow dipped into negative territory, a $908 million this quarter, as network investments continue to ramp and we had unfavorable working capital outflows associated with this seasonally heavy sales quarter. " Sprint earnings call for the period ending December 31, 2018.

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    Quote Originally Posted by shilohcane View Post
    Really... Sprint had a net loss of $343 million. Also, sounds like Sprint's past profits last year were due to Tax Reform....
    The majority of Sprint's profit last year was from the tax "reform" windfall. IIRC, about $300 million of the profit was from actual operations. That is not enough to play in the game.

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    Quote Originally Posted by elecconnec View Post
    Interesting analogy. I've made similar ones in *opposition* to the merger.

    You're looking at it solely from a network quality angle. Sure- in your race, I'd rather be driving a Lamborghini. But as a consumer going to the car dealership to buy a new car, I'm far more likely to be able to afford a Volkswagen.

    I've been a T-Mo customer since Jamie Lee Curtis was hawking Voicestream, so I've seen T-Mo's network grow from bare bones to something a lot closer to a Tier 1 provider. However, their prices for new customers is far closer to Tier 1 pricing than it ever has been.

    The counter argument to "we need another tier 1 carrier" is "we already have two". T-Mo and Sprint's merger does (potentially) create a third tier 1 carrier, and adds a bit of increased competition there, but it obliterates tier 2 entirely. If McDonald's, BK, Wendy's and Taco Bell suddenly mergered into a single $12/plate competitor to Applebees, Chili's and TGI Fridays, I wouldn't say "Yea! More competition in the casual sit-down restaurant category!", I'd say "Crap! Where am I going to get a $5 lunch now?"

    I find all of the T-Mo fanboyism here amusing, but ask you all a thoughtful question: would you all still be so in favor of this merger if T-Mo also announced that due to the costs and work involved in merging the two networks, all grandfathered plans would have to be cancelled, and all existing customers would have to pay the current T-Mo One rates to continue with the new T-Mobile?

    It's easy to be in favor of anything you might benefit from if you don't actually have to pay for those benefits.

    The fact that T-Mo has promised they wont raise rates for 3 years post-merger is really just a promise that they'll raise rates in exactly 3 years and 1 day, just like when DISH, DirecTV or cable companies tout a plan with a price "guaranteed for two years!", you know you'll feel the pain when the two years are up!
    I read about Voicestream in my history book.

    A merged T-Mobile/Sprint does have the potential to become a top-tier carrier but it would take a decade, and a lot of money, to move up to that level. Remaining a second tier carrier, selling service to those that primarily consider price, and not spending those billions on trying to copy the coverage of Verizon or AT&T, may be more logical. That's been a successful strategy for Legere.

    But as you point out, T-Mobile pricing is not really much lower than that of the top tier networks, They do throw in some freebies though, like Netflix, low-speed international data roaming, and international roaming SMS, and low-cost international voice roaming. I know several people that are on T-Mobile because of their international roaming, and they willingly put up with lack of good U.S. coverage. If they became a tier 1 carrier they might not see any need to do those things anymore.

    As to deals on cable and satellite, when I mentioned to an Xfinity sales person, in Fry's, that I was going to move to AT&T because my rate had gone up so much, she advised me on how to solve that problem. I'm sure that Xfinity knows what's going on but they ignore it because a customer paying $50 per month is better than not having a customer that was paying $85 per month. When I had satellite TV I would switch off between Dish and DirecTV every two years in order to get back on the new customer rate.

    "There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey." John Ruskin

  9. #39
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    Quote Originally Posted by elecconnec View Post
    The counter argument to "we need another tier 1 carrier" is "we already have two". T-Mo and Sprint's merger does (potentially) create a third tier 1 carrier, and adds a bit of increased competition there, but it obliterates tier 2 entirely. If McDonald's, BK, Wendy's and Taco Bell suddenly mergered into a single $12/plate competitor to Applebees, Chili's and TGI Fridays, I wouldn't say "Yea! More competition in the casual sit-down restaurant category!", I'd say "Crap! Where am I going to get a $5 lunch now?"
    T-Mobile's duty to their shareholders is to maximize profit and not to provide $5 lunches. Clearly they believe that this merger will reduce the percentage of their fixed costs and give them a larger profit margin. There will always be a market for MVNO's that cater to those desiring economy services.

    would you all still be so in favor of this merger if T-Mo also announced that due to the costs and work involved in merging the two networks, all grandfathered plans would have to be cancelled, and all existing customers would have to pay the current T-Mo One rates to continue with the new T-Mobile?
    But they're not going to announce that. Because customers are more valuable to them paying whatever grandfathered price they're paying than for them to leave. Cellular carriers rarely ever raise prices on their current customers. Because they're so sensitive to churn, they don't want people to leave.

    The fact that T-Mo has promised they wont raise rates for 3 years post-merger is really just a promise that they'll raise rates in exactly 3 years and 1 day, just like when DISH, DirecTV or cable companies tout a plan with a price "guaranteed for two years!", you know you'll feel the pain when the two years are up!
    Satellite TV is a completely different industry with completely different practices. Like I said above, don't expect cell carriers to raise prices in three years. T-Mobile made that offer because they knew were unlikely to raise prices in three years. It's an easy promise to make.

    Quote Originally Posted by actinic View Post
    By the time the sale takes place any hardware related assets will have depreciated further leaving spectrum as the primary asset. The remaining 3 split spectrum purchase at bankruptcy auction. If T-Mobile needs the funds to compete they're at least $26B richer with a then larger subscriber base less the hardware costs forgone by not purchasing Sprint.

    Time is T-Mobile's ally.
    Sprint isn't going to be liquidated anytime soon. Any bankruptcy will be a Chapter 11 which is a reorganization. That means that a bunch of debt will be canceled and they'll go right on operating just fine. They are not a company like Toys-R-Us or Sears who has a dying revenue stream and a bad business model. Eliminating Sprints debts will go a long way to making them a viable competitor for years to come. Thus there will be no assets for T-Mobile to claim if Sprint stays in business.

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    Quote Originally Posted by smsgator View Post

    A merged T-Mobile/Sprint does have the potential to become a top-tier carrier but it would take a decade, and a lot of money, to move up to that level.
    This is just more of your anti T-Mobile propaganda. It won't take Legere a full decade to fully compete once he gets all of his Sprint's resources at his disposal. When the merger happens, he will have the proper scale to compete on a level footing. And he will be aggressive going after AT&T and Verizon. I believe AT&T is the weakest and their investments into video content and distribution will leave them less focused about their wireless business.

    But T-Mobile will consolidate the Sprint resources quite rapidly and provide a great alternative to AT&T and Verizon.

  11. #41
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    Quote Originally Posted by jet1000 View Post
    T-Mobile's duty to their shareholders is to maximize profit and not to provide $5 lunches. Clearly they believe that this merger will reduce the percentage of their fixed costs and give them a larger profit margin. There will always be a market for MVNO's that cater to those desiring economy services.
    I'm sure this merger will be good for T-Mobile, and they have every right to attempt it. I'm against it as a consumer, and the government should block it in the public interest, but they won't, particularly in this era.

    As far as MVNOs keeping prices down, don't be too sure of that. MVNOs live and die at the whims of the real carriers propping them up. Cricket, for example, exists because AT&T needs a way to compete with the likes of Sprint (and T-Mobile, before they got full of themselves). When New T-Mobile absorbs Sprint and the pressure of "5 lines for $100" goes away, so will Cricket's, Boost's and Metro's raison d'etre. Oh, they'll still exist, but without the downward price pressure of the now absent Tier 2, they'll slowly creep up to a level just slightly below their owners' price points, and currently included features (unlimited data, Canada/Mexico roaming, etc.) will end up disappearing or costing extra.

    Quote Originally Posted by jet1000 View Post
    But they're not going to announce that. Because customers are more valuable to them paying whatever grandfathered price they're paying than for them to leave. Cellular carriers rarely ever raise prices on their current customers. Because they're so sensitive to churn, they don't want people to leave.
    That wasn't the question- I didn't suggest they would actually cancel grandfathered plans. I asked as a simple, hypothetical thought experiment: would you still be in favor of this merger *if* you didn't have a lucrative grandfathered plan, and was actually expected to pay Tier 1 prices for the New T-Mobile like new customers will?

    It's easy for any of us to be in favor of anything that benefits us if we don't have to sweat for it. That's what I was getting at. I'm in favor of better service, more data, extra roaming and free tacos if they come without rate increases. As I said, I've been with T-Mo nearly two decades, but there's no way I'd pay T-Mobile's current rates for their current service if I was looking for new cell service today.






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    Quote Originally Posted by jet1000 View Post
    Sprint isn't going to be liquidated anytime soon. Any bankruptcy will be a Chapter 11 which is a reorganization. That means that a bunch of debt will be canceled and they'll go right on operating just fine. They are not a company like Toys-R-Us or Sears who has a dying revenue stream and a bad business model. Eliminating Sprints debts will go a long way to making them a viable competitor for years to come. Thus there will be no assets for T-Mobile to claim if Sprint stays in business.
    Reorganization requires asset sales to satisfy creditors and shareholders.

    Guess which assets? Yep, you got it .. spectrum. The remaining 3 will haggle over how much of the spectrum pie each gets while Sprint retains some to stay in business while emerging as a considerably smaller company.

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    Quote Originally Posted by actinic View Post
    Reorganization requires asset sales to satisfy creditors and shareholders.

    Guess which assets? Yep, you got it .. spectrum. The remaining 3 will haggle over how much of the spectrum pie each gets while Sprint retains some to stay in business while emerging as a considerably smaller company.
    You should study how this usually works. A new "company" is typically formed and is the only bidder for assets that are priced so high that no one will bid (including in this case) the other carriers. This is exactly what happened in GM's bankruptcy.

    So a new Sprint will form with all of the assets and none of the debt. So there won't be a case where the remaining 3 haggle over spectrum. They'll never get close to it.

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    Quote Originally Posted by actinic View Post
    Reorganization requires asset sales to satisfy creditors and shareholders.

    Guess which assets? Yep, you got it .. spectrum. The remaining 3 will haggle over how much of the spectrum pie each gets while Sprint retains some to stay in business while emerging as a considerably smaller company.
    Sprint has used their Spectrum as colloidal on their $40+ Billion loans. That is why no one other that T-Mobile wanted to buy them. Sprint's Creditors owns their spectrum value in any asset sales if Sprint can't pay their loans back.

    Sprint to issue another $4B of spectrum-backed bonds
    " In 2018 and 2019, Sprint will have $9 billion in unsecured debt coming due, and $3.4 billion from 2020 to 2022. Unless Sprint is able to improve “long-term cash generation" and position itself to reduce debt, it will “materially increase” the odds that the company will develop an unsustainable capital structure, according to Fitch Ratings."

    Also, this from 2016 that Sprint is leasing some spectrum: Sprint breaks new ground with $3.5bn airwaves bond




    " "Sprint sold a $3.5bn bond backed by its wireless spectrum — the airwaves through which text messages, data and calls fly — in a first of its kind deal that will allow the indebted carrier to sharply cut its borrowing costs.

    The sale will see Sprint lease a portion of its own spectrum from a newly created subsidiary and follows a $1.2bn bond backed by Verizon mobile phone contracts, as carriers branch out and find new, novel ways to finance their businesses."

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    Quote Originally Posted by elecconnec View Post
    As far as MVNOs keeping prices down, don't be too sure of that. MVNOs live and die at the whims of the real carriers propping them up. Cricket, for example, exists because AT&T needs a way to compete with the likes of Sprint (and T-Mobile, before they got full of themselves). When New T-Mobile absorbs Sprint and the pressure of "5 lines for $100" goes away, so will Cricket's, Boost's and Metro's raison d'etre.
    Cricket has already been worsening their plans. I had the 5/$100 deal which is no longer available. I finally let it go because I had no AT&T coverage in parts of my house, but I can see the Verizon tower from outside (AT&T is supposed to share the fake tree but hasn't done so yet despite repeated requests). I moved to a Verizon MVNO which is a little more costly but which provides much better service.

    One source of opposition to the merger are groups concerned that losing Sprint as a carrier will cause Boost and Virgin to go away, and Boost, Virgin, and Metro PCS are offerings that a lot of lower income people are using. See https://www.latimes.com/opinion/op-e...121-story.html.

    Of course Sprint and T-Mobile aren't charities, they're businesses. To expect them to continue offering desperation pricing on their prepaid offerings is completely unreasonable. The claims of "structural racism" are ridiculous.

    What I didn't realize is that only Sprint offers Lifeline wireless in California, and that T-Mobile dropped their offering. But again, if California wants to promote Lifeline service then they should subsidize it for all carriers.

    So yes, the merger will reduce competition and cause price increases. But if T-Mobile is ever to become a Tier 1 carrier then there's the potential for them to keep pressure on Verizon and AT&T to not raise prices. But that's a long way off. Contrary to what some people believe, new cellular towers don't grow out of the ground, you actually have to build them, and it can take a very long time to do so,

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