Wireless Needs Strong No. 3 to Compete: Sprint CEO

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May 6 (Bloomberg) -- Dan Hesse, CEO at Sprint, discusses the company’s new “Spark” network, wireless competition in the United States, regulation hurdles to telecom consolidation, his relationship with T-Mobile CEO John Legere and which tech developments will push the industry forward on Bloomberg Television’s “Market Makers.”

Last year for getting a deal with softbank come how is it going?

It is going well.

The week ago we announced results and stock was up 11% on the day and 18% over the last week.

We had our best net operating income number in the last seven years.

11 quarters in a row of beating on ebitda.

Our subscriber numbers could be better, we are reengineering our network.

What has the softbank ownership allowed you to do that you could not have done before.

What is it going to enable you to do in the future that you were not able to do?

Focus more on the long-term.

This big network, sprints spark, it will take time and money to do it right.

We can take a longer-term perspective.

You have an 80% investor who was talking about a 300 year plan -- 300. whenever going to get sprint spark in your?

-- in new york?

You have it now.

It is taking three frequencies, different networks used in different frequencies and basically we had to rip out everything.

This is why our subscriber numbers have not been as strong.

By having to remove the old equipment there have been service disruptions, that has affected churn.

It is going to be a phenomenal network.

The sense i get is that there is a palpable frustration it has taken this long to get the spark networks wordhere it is.

You see it with the churn.

I perceive in the investment community, do you share that question mark it is never fast enough.

No company has ever had to build something this large.

The nextel network, the sprint network, the clearwire network, you have a great spectrum resource you are buying from clearwire, it is a large project and it is taking longer.

Our investors, that is why investors in the stock -- it has performed well, they are taking a longer-term view.

I late 2015, you're talking about speeds of 150 megabits per second to the phone.

Does that mean that sprint spark is going to be considered for the customer, by the regulator, by the investor, a viable alternative to land-based broadband?

It depends upon your applications with landmine.

--with landline.

For high definition television, people will still want landline-based service.

When you are talking about speeds for a large segment of the market it will be an alternative.

We should not look at sprint as a competitor to comcast, for example, in the delivery of 4k video, which we are starting to get.

The kind of data that is required for 4k video, landline will be the preferable way to get there.

For youtube and video applications and surfing and what have you, for a large segment of the market who is not going to 4k, it will be -- you do not see cable operators becoming competitors to you as they get bigger?

Or even partners.

They could be either or both.

Competitors or partners.

Number three and four, what could have combined.

What could sprint and t-mobile look like?

How much could they infringe on number one and number two?

The issue you have in the u.s. wireless industry is it is a duopoly, 84% of the ebitda and basically 100% of free cash flow out of to large companies.

The industry would have healthier competition with a stronger number three.

I cannot comment specifically on speculation with respect to m&a, i think a stronger number three would be better for consumers.

There might be some consumers who want to believe that or who believe that already.

How do you get regulars to believe that?

We will have to see.

If you read the papers and what have you, there are a lot of regulars who are skeptical.

If a transaction or to occur, we would have convincing to do.

It feels great to be a consumer, mobile price wars are a win for me.

How do you, that?

-- how do you combat that?

There are a lot of emotions that consumers see as positive, but how sustainable is that?

Looking at the profit performance of the big four.

How sustainable is it?

You had to cut prices on prepaid last night.

That is a question.

Particularly in the ability to invest in networks.

T-mobile and sprint have to invest more per customer and their networks.

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, can divide it among more customers and can spend more money in advertising.

What happens -- let's entertain some hypotheticals for a moment.

Let's say you do not think you can make a persuasive case to regulators that consolidation is in everybody's best interest.

If t-mobile continues with this race to the bottom on pricing, what happens to sprint?

We're going to have to compete in the market.

Sprint spark is going to give us a good foundation.

It is why you see other rate plans that are well-suited to the market.

How much less viable do you become as a profit center -- forget about profits, on a net income basis, you are not even there yet.

How much less viable do you become financially?

The real issue is for consumers.

A strong number three will get one and two to react more aggressively so everybody benefits.

If you are smaller, the big to do not react as aggressively.

That is the benefit.

Is john legere your peer?

Or worst nightmare?

John used to work for me.

He is doing a fine job.

I just want to look at the most recent tweet.

Hey, @sprint, what else do you need t-mobile to launch so you can copy it?

Do you feel like he is taking you on, the media loves it.

I don't think john is ever going to stop egging me on.

[laughter] let's talk for a moment, one could say he is a walking advertisement for t-mobile.

The ad spend mobile operators have right now is huge.

Are you ever looking at this and saying we are spending too much on advertising, doesn't really affect who is signing on?

Is is like an arms race, if your competitors spend more you need to.

You cannot afford to go silent relative to your competition.

It is the nature of our industry.

Does the data back that up.

There are ads everywhere, it does not affect me, maybe it does subconsciously.

What data tells you you have to have another ad?

It does cost a lot, we are being more effective in advertising and we have moved more to digital and social media , new forms of media that are more persuasive, particularly with millenials.

Hence a john tweets.

And "framily." what is changing are demographics, family plans only work for traditional household of three people are more.

Framily opens it up to the majority of households, 60% of households are two or fewer people.

With social media, in terms of the 18 to 33 demographic, 75% use social media, the people they are close to those beyond their immediate family and allows us to provide great offers to a broader audience.

Part of the problem with high recurring expenses like marketing and advertising, you are incurring them at a time when your product is becoming, midsized to a degree.

Voice-- is becoming, co mmoditized.

How do you fight that?

And spark we have superior data speeds, we are going to launch how traditional voice, taking a traditional voice cell phone call which is four octaves up to seven octaves.

Areas like music.

Comcast gets this, that is why comcast bought nbc universal.

At&t and verizon are waking up to the idea that content is the way to fend off commoditization.

Is that something softbank would entertain?

If you think about it as a carrier.

We announced a partnership with spotify.

That is music, i am thinking video.

Content, television, digital video.

That is what steve burke is thinking about.

That is what the folks at verizon and at&t and elsewhere are thinking about.

At a time when you are spending so much money to build out your network, you have the challenge of consolidation, is that a conversation you can participate in?



I will not disclose that the content is important part of the future.

Video content.

I am not saying.

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This text has been automatically generated. It may not be 100% accurate.


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