T-Mobile Still Optimistic on Sprint Buy; New York Approves
T-Mobile “remains optimistic and confident” regulators will approve its buy of Sprint, as reviews reach their final stages, CEO John Legere told analysts Thursday as the company reported Q4 results. The New York Public Service Commission applied jobs conditions as it voted 3-0 Thursday to clear T-Mobile/Sprint in the agency’s consent agenda, which requires no discussion. The deal is likely to be approved by the end of the first half of the year, Legere said: “If not in the bottom of the ninth inning, it’s in the late innings.”
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Legere slammed observers for finding signs of trouble in recent developments. New Street said pricing concessions T-Mobile offered the FCC Monday (see 1902050038) could show the carrier's proposed buy of Sprint has a problem. “It is hilarious to watch,” Legere said of some attempts by analysts to read the smoke signals. “It’s kind of shameful.”
“We continue to have a productive dialogue with both federal and state regulatory authorities,” Legere said. The deal has received clearances from 15 of the 19 states reviewing it, he said, before the New York clearance. He looks forward to House hearings next week. Deal critics are largely in the employ of “big telco and big cable,” Legere said. T-Mobile and Sprint have filed “tens of millions of pages” of documents with the government, Legere said. “It’s going very well.”
Legere said his company will offer the “first real” 5G network in the U.S. and has in place the equipment in 2,700 localities and six of the top 10 markets, upgraded to use the 600 MHz spectrum T-Mobile bought in the TV incentive auction. “American consumers will benefit from a nationwide 5G that is both broad and deep,” Legere said.
Craig Moffett of MoffettNathanson wrote investors that recent developments, including the preemptive pricing commitment, raise questions. “None of this means the deal is doomed,” the analyst said. “Just as we have been adamant in not raising our deal odds when everyone thought the deal was a slam dunk, we’re not going to lower them now just because of a few additional data points.”
“Results and guidance this quarter were solid, but still show the company has more room to run,” advised New Street’s Jonathan Chaplin.
“We continue to drive our business beyond expectations,” Legere said. “I feel good about the state of our business going into 2019.”
The wireless company reported 2.4 million total net adds in Q4, including 1.4 million postpaid phones, and $640 million in profit on $11.4 billion in revenue. The company projected 2.6 million-3.6 million postpaid net adds this year. Capital expenditures are expected to hit $5.4 billion-$5.7 billion for the year.
Cable wireless can be a “disruptive” force in the wireless industry but so far isn’t a huge challenge, Legere said. Cable companies are moving aggressively, he said: “So far, aggressively means … that they’re spending massive amounts of money” and getting “small amounts of customers.”
In New York, Commissioner Diane Burman concurred with the order in case 18-C-0396. Reviews continue in California, Hawaii and Pennsylvania.
“The likely harms are job related,” but with the conditions will have net benefits, the PSC order said. It won’t affect wireline competition, isn’t expected to interrupt or change service for existing Sprint wireline customers, and planned upgrades will continue, it said. Wireless and MVNO competition issues are subject to FCC and DOJ review, though the PSC plans to track New York 5G rollout using Form 477 data.
The new company must show “that the total number of employees in New York State as of the date of this Order is maintained on the third anniversary” of the transaction's close, said the PSC order. Total direct employees at three years after closing must be “equal to or greater” than the two companies together have today, it said. The carriers pledged to keep the same number of direct employees in New York for at least two years (see 1901140021). The regulator required the company continue operating its Syracuse relay call center and honor existing contracts until expiration.