John Legere, the chief executive officer of T-Mobile who’s known for wearing company-branded shirts and taunting his competitors on Twitter, is likely to run the combined company, according to two people familiar with the matter who asked not to be identified because the plans are private. He’s being favored over Dan Hesse, the 60-year-old CEO of Sprint, who took over a broken company in 2007 and did enough fixing, even while operating at a loss, to attract a new owner last year.
As negotiators hammer out the finer points of an agreement, Legere will increasingly be responsible for the prospects of an enlarged company. It would fall to him to integrate disparate management teams and divergent marketing strategies, while also combining two networks that are years behind the technological advances of their biggest rivals, AT&T Inc. (T) and Verizon Communications Inc. (VZ)
“With Legere in charge, T-Mobile can now really take it to Verizon and AT&T,” said Jonathan Chaplin, an analyst at New Street Research. “T-Mobile is loved by regulators. Before, Legere was just half a maverick. After, he will be twice as crazy with double the asset base to work with.”
Legere, 56 and a self-styled rebel of the wireless industry, branded T-Mobile as the un-carrier, and his marketing antics and price cuts have made it the fastest-growing U.S. wireless company. His biggest deal to integrate at T-Mobile was the acquisition of MetroPCS Communications Inc. last year.
Hesse has said that it wouldn’t bother him if he doesn’t run the combined company.
Sprint, which SoftBank Corp. (9984) purchased control of in July, will offer about 50 percent stock and 50 percent cash for T-Mobile, and T-Mobile’s Bonn-based parent Deutsche Telekom AG (DTE) will retain a stake in the combined company, people familiar with the matter said this week. The agreement, which could value T-Mobile at almost $40 a share, could be announced as soon as July, the people said.
T-Mobile shares rose 0.8 percent to $33.77 today, while Sprint dropped 2.7 percent to $8.78.
There’s still a lot of work to be done before a deal can be announced, including deciding management of the new entity, the people said.
SoftBank Chairman Masayoshi Son declined to comment at an unrelated press conference in Japan yesterday. Bill White, a spokesman for Sprint, declined to comment, as did Andreas Fuchs, a spokesman for Deutsche Telekom. Anne Marshall, a spokeswoman for T-Mobile, didn’t respond to a message seeking comment.
Handed the smallest U.S. wireless carrier in 2012 after a failed sale to AT&T, Legere set out toward one main goal: gaining customers.
After rolling out the un-carrier strategy in March of last year, T-Mobile has introduced phone financing that separates the cost of the phone from the service charge and breaks phone payments up over monthly installments. This freed T-Mobile from having to sell phones at steep discounts and let customers get new smartphones without signing two-year commitments.
“We laughed at un-carrier when if first came out,” Chaplin said. “Now it looks like consumers love it. I think the brand resonates well with people.”
In what was probably the biggest challenge leveled at its larger rivals, T-Mobile offered to reimburse the early termination penalties for customers who break their contracts and switch to T-Mobile.
Rather than watch customers jump ship, Verizon, AT&T and Sprint have all adopted similar sales plans.
While the promotions have helped boost T-Mobile’s sales, it’s come at a price: four straight quarters of net losses.
Sprint hasn’t been an aggressive competitor on price, and as a result, has lost more than 2.5 million monthly contract customers in the past five quarters. The company has also been losing money.
While Hesse has largely avoided the price battles, he did introduce Framily plans, an offering for friends and family. He said 1 million users signed up for the offering in the first 40 days.
Hesse is also investing in a super-fast network that would help Sprint compete on speed and quality, rather than price. Its long-term evolution network isn’t ready yet, hampering its service quality in many cities.
“Hesse strikes me as a safe pair of hands, who’s all about methodically getting Sprint back in shape and laying the foundation for future growth and profitability,” said Jan Dawson, an analyst with Jackdaw Research in Provo, Utah.
Because Sprint’s brand doesn’t stand for anything as strongly as T-Mobile’s, Chaplin said that the combined company will probably only keep the Sprint brand for some of its business offerings.
Keeping Legere in charge may be Deutsche Telekom’s way to help prevent the business from falling apart during the merger process, which could drag out as the companies face skeptical U.S. regulators. It also probably means more tweets from Legere referencing Batman and TV shows, as well as taunting rival carriers. The question is whether he’ll keep heckling Sprint, which he refers to on Twitter as #Sprintlikehell.
Some of his anti-Sprint tweets have included “You guys, #Framily is not a thing. It’s a typo.” and “Oh @Sprint – you really #FruckedUp that imitation of our #uncarrier move! #ContractFreedom for all.”
Legere poked fun at AT&T after a broken air-conditioning system at San Antonio’s AT&T Center caused LeBron James to cramp up and miss the conclusion of the National Basketball Association Finals opener last night. Temperatures climbed above 90 degrees (32 degrees Celsius) because of an electrical failure that knocked out the air conditioning.
“It’s bad enough when you can’t power a network, but now you can’t power the AC during the finals?!?! Come on @ATT!” Legere tweeted.
Legere backs up his unconventional T-shirt and blazer wardrobe with an irreverent, though well scripted, shoot-from-the-hip discourse at press events and on Twitter. At this year’s Consumer Electronics Show, he crashed an AT&T-hosted party, saying he only attended so he could see rapper Macklemore perform.
Both Hesse and Legere rose through the executive ranks at AT&T. And after leaving Ma Bell, both men developed their own version of an anti-corporate, semi-rebellious style.
Last month, Hesse said in an interview on Bloomberg Television that it wouldn’t bother him not to run the combined company.
“I am 60 years old,” he said. “I have a lot of things I still want to do in life.”
Hesse can walk away with the legacy of being the man who rescued Sprint, according to Chaplin.
“He stabilized the business, acquired a robust spectrum portfolio and attracted SoftBank,” Chaplin said in an interview. “He can legitimately say that ‘When I came along the company was headed to zero, and now we have a real future. I can ride out into the sunset, my work is done.’”
Losing Hesse will strip Son, chairman of both SoftBank and Sprint, of a steady hand. Like Legere, Son is known for his chutzpah. Son once claimed that he has a 300-year business plan that includes investments in 5,000 companies by 2040.
“Where the rubber meets the road, the overblown rhetoric from Masa Son is being tempered and channeled through Dan Hesse, who’s well grounded in the reality of doing business in the U.S. telecoms market,” Dawson said.
Son might see Legere as a kindred spirit, as opposed to Hesse, who is “more the yin to his yang,” Dawson said.
(An earlier version of this story corrected T-Mobile’s stock drop and share price in the eighth paragraph.)