T-Mobile Says Sprint Deal Could Help Crack Wireless Duopoly

T-Mobile US Inc. Chief Executive Officer John Legere, who casts himself as a renegade of the wireless industry, said a Sprint Corp. deal may help the company challenge the “duopoly” of Verizon Wireless and AT&T Inc.

When asked about a possible merger with Sprint, Legere said T-Mobile needed more airwaves and other resources to take on its larger rivals -- something consolidation could provide. Sprint’s majority owner, SoftBank Corp., is in discussions about combining the carrier with T-Mobile, according to people with knowledge of the matter.

“We all need better scale and capability,” he said in a televised interview with Emily Chang on “Bloomberg West.” “The question starts to be: How do you take the maverick and supercharge it? We either need more spectrum and capability and a lot more investment, or we need consolidation.”

Since taking the helm at T-Mobile in 2012, Legere has introduced more aggressive pricing and abandoned industry practices, such as requiring customers to sign long-term contracts. He also delights in needling his rivals, especially AT&T, which Legere calls “the Death Star” -- a reference to the company’s globe logo.

In the process, T-Mobile has reversed a subscriber exodus and won market share. Those successes have raised speculation that regulators would block a merger with Sprint, fearing that the industry would be losing its most aggressive competitor.

Photographer: Patrick T. Fallon/Bloomberg

A customer carries a T-Mobile US Inc. shopping bag after leaving a retail store in Torrance, California. Close

A customer carries a T-Mobile US Inc. shopping bag after leaving a retail store in Torrance, California.

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Photographer: Patrick T. Fallon/Bloomberg

A customer carries a T-Mobile US Inc. shopping bag after leaving a retail store in Torrance, California.

‘Ultimate Maverick’

By arguing that a deal would make T-Mobile an even bigger renegade, Legere may mitigate those concerns. Third Point LLC founder Daniel Loeb, an investor in both SoftBank and T-Mobile, made a similar case earlier this week.

SoftBank CEO Masayoshi Son, who has vowed to build his company into the world’s largest wireless carrier, is the “ultimate maverick” and would preserve T-Mobile’s rebellious spirit, Loeb said in a letter to investors.

Son “would likely look to convert substantial synergies into market-share gains, enabled by amplifying the innovative business practices,” Loeb said.

Scott Sloat, a spokesman for Overland Park, Kansas-based Sprint, declined to comment.

Shares of Bellevue, Washington-based T-Mobile fell 3.2 percent to $31.68 at the close in New York, part of a broader stock slide today. Sprint declined 5.8 percent to $8.40.

Early-Termination Fees

To entice customers away from other carriers, T-Mobile is offering defectors as much as $450 in credits. The company also pays early-termination fees when subscribers break their contracts to join T-Mobile.

Photographer: David Paul Morris/Bloomberg

A man walks past a Sprint Nextel Corp. store in San Francisco. Close

A man walks past a Sprint Nextel Corp. store in San Francisco.

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Photographer: David Paul Morris/Bloomberg

A man walks past a Sprint Nextel Corp. store in San Francisco.

Most of T-Mobile’s strategy has focused on undercutting the mobile plans offered by rivals, raising the specter of an industry price war. Verizon Wireless, the largest mobile-phone carrier, signaled this week that earnings may come under pressure if price competition escalates. Verizon’s comments triggered the biggest intraday price decline for its stock in almost five months.

In the interview televised today, Legere said he doesn’t see it as a price war.

“This is a very profitable growth business for us,” Legere said. “I can’t help it if someone has artificially used the duopoly to drive artificial margins. That’s not a price war -- that’s healthy competition.”

Pink Shirts

Legere, a 55-year-old who frequently wears a leather jacket over a pink T-Mobile shirt, held the interview at a Macklemore concert hosted last night by his company in Los Angeles. The event served as another opportunity to rib AT&T, which put on its own Macklemore performance earlier this month at the International Consumer Electronics Show in Las Vegas. Legere showed up at the AT&T concert wearing his trademark T-Mobile shirt and was soon thrown out by security. He later made light of AT&T’s heavy-handed tactics on Twitter, where he has almost 80,000 followers.

The two companies have a complicated history. AT&T, which Legere sometimes refers to as the “mother ship,” abandoned a $39 billion deal to acquire T-Mobile in 2011 after facing regulatory opposition. Legere also used to work for AT&T in the 1980s and ’90s.

At last night’s show, Legere crowed about finally getting to see Macklemore perform. Mark Siegel, a spokesman for Dallas-based AT&T, declined to comment.

“This is a big day for us,” Legere said. “The mother ship is a big competitor of ours, and so far it is going pretty well for our customers.”

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Emily Chang in San Francisco at echang68@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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