T-Mobile's Marketing Campaign Shows Why a Sprint Buyout Is a Bad Idea

 
 
By Wayne Rash  |  Posted 2014-01-07 Email Print this article Print
 
 
 
 
 
 
 

NEWS ANALYSIS: The competitive marketing moves by T-Mobile's CEO should show government regulators why it would be a bad move to approve a Sprint-T-Mobile merger.

T-Mobile CEO John Legere will announce on Jan. 8 the next step in the wireless carrier's "Un-carrier" marketing campaign. This time, apparently, T-Mobile will announce that it will pay the contract termination fee for customers who decide to join T-Mobile. The amount being talked about amongst the wireless cognoscenti is that T-Mobile will pay $350 per line, including lines for family plans if everyone in the plan agrees to switch.

The chances that T-Mobile would indeed make this offer were only bolstered by AT&T's announcement that it would pay up to $450 per line for T-Mobile customers who switched to that carrier. The difference is that AT&T will put you into a 2-year contract. This is all interesting, of course, but it's what's going on in the background that's the real story.

What John Legere is doing is showing the wireless industry that the FCC and the Justice Department were right when they pulled the plug on the attempt by AT&T to buy T-Mobile for $39 billion in 2011. At the time, AT&T said that preventing the acquisition would be bad for consumers. What Legere is doing is proving that allowing T-Mobile to remain independent provided an important market alternative for wireless customers.

But Legere is also doing something else. He's making it almost impossible for Sprint owner SoftBank to get approval to buy T-Mobile. The question is no longer open for discussion—clearly an independent T-Mobile is good for consumers.

Under Legere's leadership the wireless industry has been transformed. Contracts are disappearing, monthly rates are down, roaming charges are disappearing and even extravagant data charges are coming down. The wireless industry is now dancing to competitive T-Mobile's tune, and it's a tune that consumers are paying attention to. The company's offers brought T-Mobile an additional 1 million subscribers in the past quarter.

So if everything is going so hunky-dory for T-Mobile, why is SoftBank drooling at the prospect of taking over the company? Oddly enough, it has nothing to do with T-Mobile's new customer-focused efforts. In fact, Legere's efforts to disrupt the industry may stand in the way of SoftBank's effort to have Sprint buy T-Mobile. But it may not stop Masayoshi Son's efforts to try anyway.

It's important to realize that investors such as Son aren't particularly interested in T-Mobile as a wireless company as much as they are in finding a way to buy stock, have it go up in value, and then selling it again. Because Sprint and its owner SoftBank are already wireless companies, a purchase seems to make sense. But in reality, it makes no sense at all.



 
 
 
 
 
 
 
 
 
 
 
 
 

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