Sprint CEO Hesse: Industry Needs Third Competitor to ATandT, Verizon

Sprint CEO Dan Hesse, during the company's first-quarter earnings call, argued that Sprint led the U.S. to 4G "supremacy" and outlined why a third, true market competitor is necessary.

Sprint CEO Dan Hesse, during a conference call April 28 to talk about the carrier's earnings, continued his sharp criticism of AT&T's proposed $39 billion bid for T-Mobile, claiming the combined company and Verizon Wireless would have a "duopoly" that would hurt both competition and innovation.

Speaking with analysts and journalists to announce Sprint's first-quarter earnings, Hesse said the larger AT&T and Verizon-currently the largest carrier in the United States-would control about 70 percent of the wireless market, leaving Sprint a distant third. It not only would be bad news for Sprint, but also for customers in general. AT&T currently is the country's second-largest carrier. Federal regulators still need to okay the deal, a review process that could take a year.

"Sprint's innovative influence on this industry demonstrates why the wireless industry is much better off by having a strong No. 3 player," he said. "I think there's little doubt that Sprint's leadership in rolling out the nation's first 4G network greatly influenced Verizon's decision to pressure the industry suppliers to accelerate the market availability time tables for the LTE [Long-Term Evolution] standard and Verizon's own timetable to roll out 4G services, which in turn accelerated AT&T's deployment timetable for 4G."

Hesse added that, after falling behind when Europe converted to the GSM standard, the United States has regained its " wireless network technology innovation and supremacy" because of its leadership in 4G.

"If Sprint had not been a legitimate ... competitive threat," said Hesse, "the U.S. would still be a wireless also-ran."

Sprint announced income of $259 million during the quarter on revenue of $8.3 billion-an increase of 3 percent from a year ago. It also added more new customers during the quarter than it has in five years, with the addition of more than 1.1 million total wireless net subscribers. Additionally, it enjoyed its best-ever post-paid churn of 1.81 percent during the quarter, as it added its third 4G smartphone and announced the upcoming availability of 4G tablets from BlackBerry maker Research In Motion and HTC, bringing its total announced 4G devices to 22.

However, Sprint also lost 114,000 contract subscribers during the quarter. In context, Hesse suggested, Sprint still managed to whittle down the figure from first-quarter 2010's 2.15 percent customer loss, while facing, now, not one but two competitors offering an Apple iPhone 4. When asked whether a Sprint iPhone was being planned, Hesse, unable to comment on "potential discussions" with suppliers, joked, "What is it, like the 55th time I've been asked that?"

Hesse also suggested that Sprint's pricing has positively benefitted the overall market. The rate plan AT&T introduced, after losing its exclusive relationship with the iPhone, he said, looks "eerily similar" to the Any Mobile, Any Time plan Sprint introduced in 2009.

In his closing remarks, before opening the call to questions, Hesse took a final stab at the topic, acknowledging that decreased competition in the industry would cause a rise in prices-a benefit, as far as investors are concerned.

"I don't think enough thought has been given to the likely reduction in wireless innovation, the possibility of more regulation to make up for the loss of competitive market forces, and the influence more regulation could have on diverting away investment dollars from wireless-to say nothing of the impact a carrier duopoly could have on other industry players, like network infrastructure or handset suppliers or application developers," Hesse said. "Sprint is pro-competitive, and our investment thesis is that all boats will float higher in a vibrant and innovative industry, especially an industry that has the unbridled potential of wireless."