T-Mobile USA Names Legere Chief as Customer Losses Mount
T-Mobile USA Inc., the fourth- largest U.S. wireless carrier, named John Legere as chief executive officer, turning to a phone-industry veteran to reinvigorate growth and challenge Verizon Wireless and AT&T Inc. (T)
Legere, a former CEO at Global Crossing Ltd., fills the vacancy left by Philipp Humm, who stepped down in June. Jim Alling, who had run the Deutsche Telekom AG (DTE) division on an interim basis, will return to the position of chief operating officer, according to a statement today.
A 32-year telecommunications business veteran, Legere oversaw Global Crossing’s emergence from bankruptcy in 2003 and helped transform the company into a provider of Internet-based communications services. He managed the company’s $1.9 billion sale to Level 3 Communications Inc. (LVLT) last year. The 54-year-old faces the task of halting customer losses at T-Mobile, reducing costs and overseeing a network upgrade that will match technology offered by larger rivals.
“Legere has a reputation of a wheeler-dealer: He brought Global Crossing back from bankruptcy and ended up selling it on pretty good terms for Global Crossing holders,” said Donna Jaegers, an analyst with D.A. Davidson & Co. in Denver. “With T-Mobile getting fresh cash from the tower sales, we will see what Legere will do to catch up to competitors.”
After Deutsche Telekom failed to sell T-Mobile USA to AT&T Inc. last year, the German company explored options to combine it with local rivals, including MetroPCS Communications Inc. (PCS), people familiar with the situation said in May. T-Mobile USA also put its cellular towers up for sale to help finance network expansion, a person with knowledge of the matter said in June.
“We are pleased to see the market reaction,” Deutsche Telekom CEO Rene Obermann said in an interview. “It’s not so much a surprise, given that John has a proven track record.”
Legere, a Massachusetts native and a competitive marathon runner, also has served as head of AT&T’s corporate strategy and business development, and he ran Dell Inc. (DELL)’s European and Asian businesses.
Legere said his top priority at Bellevue, Washington-based T-Mobile is to return to growth, rather than focusing on mergers and acquisitions.
“Any company that is playing the game for M&A is in trouble,” he said in an interview. “That’s not the case with T- Mobile.”
Legere aims to leverage T-Mobile’s unlimited data plan, which has helped the company stand out from the more restricted offerings at Verizon and AT&T, the largest U.S. carriers. He also signaled that T-Mobile will go after Sprint Nextel Corp., No. 3 in the market.
“If I were the No. 3 player, I’d be watching over my shoulder,” he said. “We’ve made moves to be a value leader.”
Even so, T-Mobile’s smaller size makes it hard to compete with the major carriers, said Will Draper, a London-based analyst at Espirito Santo Investment Bank.
“He has significant problems to deal with,” Draper said. “First, he must stop the subscription losses and revenue decline. In the long term, there are big strategic challenges linked to the company’s lack of scale.”
T-Mobile USA lost 1.65 million contract customers last year and has reported more defections this year, forcing the company to reduce operating costs and invest in new technology. The carrier said in March it plans to shutter seven out of 24 call centers, cutting 1,900 jobs. In May, it announced plans to reduce 900 more jobs.
As part of the turnaround effort, the division has budgeted an additional $1.4 billion for network upgrades for the two years through 2013, bringing total investment to $4 billion. The carrier plans to roll out a faster network using long-term evolution, or LTE, and obtain additional wireless frequencies.
With 33.2 million users, T-Mobile USA is positioning itself as a more affordable alternative to Verizon, AT&T and Sprint. (S) T- Mobile USA has about 36,000 employees and generated about 25 percent of its parent’s revenue last year.
Revenue from Deutsche Telekom’s U.S. business rose 5.3 percent to 7.7 billion euros ($10 billion) in the first half. The unit’s adjusted earnings before interest, taxes, depreciation and amortization climbed about 15 percent to 2 billion euros, helped by cost cuts.
Humm left T-Mobile USA to join competitor Vodafone Group Plc (VOD) as head of northern and central Europe.
To contact the reporter on this story: Joseph de Weck in Frankfurt at firstname.lastname@example.org
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