T-Mobile execs lament failure of Sprint merger, but ‘you never say never’

During an appearance today at an investor relations event, T-Mobile’s executives discussed the company’s failed merger with Sprint with a tone that could best be described as wistful longing for what might have been.

“This team was highly convicted that we had a unique opportunity for value creation with the Sprint deal,” said T-Mobile CFO Braxton Carter. “Very conservatively, there were at least $37 billion of hard synergy [in the now-collapsed deal]. Mostly in the network. You know, Neville [Ray, T-Mobile’s CTO] and his team for 4-5 months built the most detailed Newco [combined T-Mobile and Sprint] network model—it was a thing of beauty. … But it wasn’t meant to be.”

Added Carter: “Could something happen in the future? You never say never.”

Carter was responding to a question about T-Mobile’s merger-and-acquisition prospects in 2018 and argued that the company will continue to participate in those discussions, though he clearly seemed somewhat dejected that a merger between T-Mobile and Sprint was not consummated.

“It’s a shame it didn’t happen,” he said, noting that T-Mobile’s leadership team formed tight relationships with their counterparts at Sprint during months of negotiations between the two companies. Indeed, he said he plans to go fishing with Sprint’s outgoing CFO Tarek Robbiati in New Zealand sometime this year.

However, Carter said that the value of a potential merger between Sprint and T-Mobile is going to decline as Sprint continues to invest in improving its network. “Some of those synergies will dissipate,” Carter said.

That said, Carter explained that T-Mobile will continue to evaluate its options for potential M&A in the industry. And he offered some general commentary about the operator’s prospects: “The question is what real opportunities are out there. We think that there could be significant value creation,” Carter said. “Cable? We’ll see how things develop. We’re strong believers in convergence. … It’s not a question of ‘if,’ it’s a question of ‘when.’ But I think that’s going to be really more of a longer tail development.”

During the same event, T-Mobile’s Mike Sievert also underscored what he said was his company’s solid position in the market and its opportunity to lead industry M&A. “We think we have an incredible hand for organic value creation, but also potential participation as the industry changes,” he said. “Because we’ve got the brand, the customers, the capabilities around where this market is going, not where it’s coming from. And that really fires our team up. And that makes us really excited about 2018.”

T-Mobile’s executives also covered a range of other topics during their discussion, including:

Growth prospects. Sievert argued that T-Mobile will continue to grow its customer base in the months and years to come by offering compelling services and offers to specific demographics like older customers, suburban Americans and business users. “Our job is to look for ways to keep the growth going without creating increased competitive intensity in what’s already a pretty competitive market. So that’s the best return. So, it’s all about expansion: geographic expansion is a piece of it, and also segment expansion,” Sievert said. “This unlimited 55+ offer we brought to market has been fantastic because it’s really going after prime AT&T and Verizon customers, and giving them a tipping point to finally switch.” T-Mobile recently launched an offer for customers aged 55 years and older that provides two lines of unlimited data for $60 per month. “That’s going really well,” Sievert said.

Network coverage and 5G. T-Mobile CTO Neville Ray said the operator will continue to build out its geographic coverage area, largely through deploying its 600 MHz spectrum. “The geographic coverage is now extremely close to the Verizon guys,” he said. Ray added that T-Mobile continues to expect to launch a mobile 5G device sometime in 2019 and will offer nationwide 5G coverage in 2020. “The radio we’re deploying [with our 600 MHz buildout] is 5G capable,” he said.

Dividends. Carter said T-Mobile would eventually pay out dividends to its shareholders but not anytime soon. “It’s really not on the radar for the next several years,” he said.