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Sprint CEO Says Strong No. 3 Needed Amid Price Wars

Sprint Corp. (S) Chief Executive Officer Dan Hesse said the wireless price wars aren’t sustainable and show the need for a bigger No. 3 competitor in the U.S.

“A stronger No. 3 will get one and two to react more aggressively so everybody benefits,” Hesse said in an interview with Erik Schatzker and Stephanie Ruhle on Bloomberg Television today. “If you are smaller, the big two do not react as aggressively.”

Billionaire Masayoshi Son, who controls Sprint and has met resistance from regulators skeptical about a merger with T-Mobile US Inc. (TMUS), has been trying to recast the potential combination as being beneficial for consumers. Such a deal would combine the third- and fourth- largest wireless carriers in the U.S., following AT&T Inc. and Verizon Communications Inc. Sprint has been trying to defend itself amid intensifying wireless competition as T-Mobile has led the way on promotions and price cuts.

“There are a lot of emotions that consumers see as positive, but how sustainable is that?” Hesse said of the price wars.

Both Sprint and T-Mobile posted net losses in the first quarter. Sprint introduced a cheaper plan for Boost pay-as-you-go customers today, matching a $40 prepaid plan from T-Mobile’s MetroPCS brand.

“T-Mobile and Sprint have to invest more per customer in their network,” Hesse said. “Think of a nationwide network, it largely affects costs. It is like a jumbo jet. AT&T and Verizon, because of their size, can put more customers on that, an divide it among more customers and can spend more money on advertising.”

SoftBank Corp. (9984), the Tokyo-based owner of Sprint, is expected to make a formal bid for T-Mobile in June or July, a person with knowledge of the situation said last week. T-Mobile CEO John Legere is the leading candidate to run the combined company, one of the people said.

Hesse said in today’s interview that it wouldn’t bother him not to run the combined Sprint and T-Mobile.

“I am 60 years old,” he said. “I have a lot of things I still want to do in life.”

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net James Callan

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