T-Mobile wants a big break-up fee from Sprint in case deal is killed before closing
Now, as Sprint and T-Mobile are said to be negotiating a merger, T-Mobile and its majority owner are seeking a large break-up fee from Sprint in case history repeats itself. Deutsche Telekom, which owns 67% of T-Mobile, is asking for a $1 billion break-up fee and wants promises that the T-Mobile brand and some of its management team would remain after a deal closes. To that end, current speculation has T-Mobile CEO John Legere at the top of the list to run a merged Sprint-T-Mobile.
Those familiar with the thinking of the carriers involved, say that they could decide to wait until an auction of spectrum is completed in 2015, or until a new administration takes over the following year, before trying to tie the knot. Regulators like the FCC and the FTC have both admitted to be against a deal between the nation's third and fourth largest mobile operators. Still, there are those close to Sprint and its parent company SoftBank, who expect a bid for T-Mobile to be announced as soon as next month.
Next week, the FCC will make a ruling on how much spectrum a carrier can hold. If the agency ruling means that Sprint has to count more of its holdings against a cap, it could limit the amount of spectrum the operator could obtain via a takeover. That could effectively kill any chance Sprint had to purchase T-Mobile.
There could be a wild card in the whole affair. On Thursday, we told you that Dish Network CEO Charles Ergen stated that he would be interested in purchasing T-Mobile if a bid from Sprint fails to close.
1. PBXtech (Posts: 994; Member since: 21 Oct 2013)
Nothing about Sprint buying T-Mobile excites me. I came from Sprint, glad I left and want no part of them again. T-Mobile is turning things around, it would be nice if they could be left alone to continue their growth. If it flattens out, then discuss a merger, but not until then.
14. fzacek (Posts: 2350; Member since: 26 Jan 2014)
+1 Agree. T-Mobile is doing so well right now and I see no reason why a merge is necessary. Sprint wants it because they are a dyeing carrier and want something to save them from doom. T-Mobile would be better off alone...
20. youlookfoolish (Posts: 144; Member since: 14 Dec 2012)
T-Mobile is not doing well. They lost $50 million last quarter and $151 million this quarter. More than half of their net adds are non profitable prepaid customers.
Deutsche Telecom can't wait to unload them. Glad the service works for you and a few dozen people but as a provider they are hot garbage.
25. Augustine (Posts: 844; Member since: 28 Sep 2013)
Pray, tell, how are prepaid customers paying the same for the same service as postpaid customers not profitable?
30. JEverettnow (Posts: 218; Member since: 11 Mar 2013)
its not profitable because they are losing money hand over fist. Its in the income reports
33. Augustine (Posts: 844; Member since: 28 Sep 2013)
You haven't addressed my question. Do you have an answer why $50 for a prepaid plan is not profitable while $50 for a post-paid identical plan is? Are you confusing prepaid customers with contract customers, for the latter do not exit in T-mobile?
Besides, do you mean to say that T-mobile has had a couple of bad quarters while it's expanded its network and acquired customers or that it's irreparably doomed to bankruptcy?
36. InfDaMarvel (Posts: 13; Member since: 20 Oct 2010)
Its already a known and public fact that Tmobile is losing money while gaining customers. Sprint is losing customers while losing money. However Sprint was just brought out by another company not to long ago giving it the ability to buy Tmobile's American branch. Why are you even asking question that cant be answered in response to a fact.
37. tuminatr (Posts: 709; Member since: 23 Feb 2009)
First it’s not they have had a couple of bad quarters they have not been profitable for years. And you are correct $50 prepay vs $50 postpay is the same amount of revenue coming in. However it’s less than the rest of the carriers and that’s bad for revenue and in the long run bad for customers because they will need to make up for it somehow. Also no contract is a good deal for the customer but bad for consistent income stream for the carrier prepay customers are not as loyal and yes contracts do play a part in that.
39. Augustine (Posts: 844; Member since: 28 Sep 2013)
And I say, so what that it's bad for the company? I'm not married to T-mobile nor am a stockholder. I just contracted the service I wanted for the price I wanted. I couldn't care less that they go belly up in the long term. For my choice is to pay more now and later or less now and more later. I take the second choice.
Then again, could it be that the profit margin in the US is just too freaking huge? How come that mobile plans in the US are twice and even thrice as expensive as in Europe or Latin America? Carriers in those places are not folding left and right, so there seems to be a lower price point that profit and investments still happen.
40. tuminatr (Posts: 709; Member since: 23 Feb 2009)
I would like to note first that I am in no way saying you made a bad choice but be honest when consumers buy based on price the minute a better price comes around that offers the same quality you will switch. This is my point companies selling based on price (like t-mobile) is much harder to make money because you become a commodity and are easily replaced. And I know this is basic economics but companies are machines to make money the good ones provide great benefits to their customers and employees.
As for profit margins you are trying to compare the US carriers to the foreign cell companies. The biggest thing we forget it USA is a much more rural country and to do business here you need to provide service everywhere. Go look at a coverage map of the USA and now UK, France, Mexico, Canada, etc, etc. In many other countries go rural and don’t expect coverage. We have more land and more towers and that costs more money to build and maintain. Customers expect their phones to work in the middle of rural Nebraska and Montana. So with the population more spread out it’s more expensive to provide cell service for them.
The other side to this is we do have more regulation than any other country I can think of and this is costly for the consumer. The upcoming 600mhz auction will generate maybe 100 billion for our government and who ends up paying that, yep the US consumer. Some countries give away the air waves and many it is much cheaper than the USA
42. Augustine (Posts: 844; Member since: 28 Sep 2013)
As I said, I don't invest my money in T-mobile, I just contracted a service from it. My approach is not what I can do for T-mobile, but it can do for me and for how much.
It is a choice by particular companies to grow beyond and above its competitors. Such companies will have a much higher cost for the reasons you stated, but it is their choice. As a consumer, it's up to me whether that's a relevant factor for me or not.
Other companies, like T-mobile, chose otherwise. It doesn't seem to be going after the remaining 10% of the population just because it can. This way, its fixed costs are lower than its competitors and it can offer a lower price. Or at least I think so.
On a side note, the size of these US is a great reason why there should be a dozen major carriers and why four still reeks of a virtual cartel. Smaller countries might very well be satisfactorily serviced by four major carriers, as it seems to be typical in Europe, but American consumers in different areas have different needs and cannot have their needs serviced for the best price with so few choices.
Unfortunately, big American corporations learned the lesson from a century ago and now carefully prop up an appearance of competition, like a duopoly, with the tacit approval of politicians suitably bribed with campaign contributions. We the people are worse for it.
43. tuminatr (Posts: 709; Member since: 23 Feb 2009)
I understand you don’t have stock in t-mobile I don’t either. I was just trying to answer your question “Pray, tell, how are prepaid customers paying the same for the same service as postpaid customers not profitable?”
I just don’t think that people would buy service from a bunch of small carriers. And if this is what you believe you should look at Sprints rural carrier alliance closely they are trying to bring back something like the old cellular one (if you not familiar it was franchised service under one brand name).
When people want a cell carrier they just want simple most people will even pay more for simple, hell that’s what Apple has based its whole product experience on make a good product and make it simple and they even take away options and people see it as a less complicated and better product.
If you believe T-mobile is doing something different you are drinking the Kool Aid. They are doing something different but in their own best interest. Full price no contract phones are because they were losing their shirts on upfront costs of phones. Prepay and not contract service is because you can’t commit someone to a service if they receive nothing for their commitment. As for price and coverage there are many prepay carriers out there and they all offer similar $40 to $55 unlimited everything prices. I just don’t understand they hype
Now to your claims of crony capitalism there is a little truth here but you can’t have that kind of capitalism without a very big government. Think about it if the FCC gave away the spectrum rather than charge for it, if the telephone regulations were less so smaller companies could compete against the big ones then the market would be better for the consumer. So to fix this you need a smaller and less intrusive government. I for one don’t see any support for that I just see people saying companies are evil. And yes I realize you did not say that or maybe even mean it but that how many, well maybe even a majority of Americans think
2. darkkjedii (Posts: 13804; Member since: 05 Feb 2011)
Dear phonearena.com. These popup ads are ruining the sites experience.
6. Planterz (Posts: 1343; Member since: 30 Apr 2012)
What popup ads?
Oh yeah, I forgot. There's still some people who've never heard of AdBlock. Or could it be that you're using (*snort*) IE?
8. dontneedtoknow (Posts: 154; Member since: 17 Feb 2014)
please explain to me how to get that on a phone!
9. Planterz (Posts: 1343; Member since: 30 Apr 2012)
Oh yeah, I didn't think about that. Those translucent overlay popups are horrible (if that's what you're seeing) and a PITA to close.
There's a couple adblockers (AdAway, Lucky Patcher) for Android, but they require root. They're not 100% on all sites, but I never see ads or popups on my phone or tablet when browsing Phone Arena.
13. 0xFFFF (Posts: 3806; Member since: 16 Apr 2014)
On Android, you can just use Firefox and AdBlock. No root required.
16. engineer-1701d (Posts: 1718; Member since: 13 Mar 2014)
its a hack on rooted phones try ad away or ad blocker app you need a few extra steps but it works.
45. givemetacos (Posts: 16; Member since: 12 May 2014)
IE actually does have access to Adblock Plus
By default it doesn't even come with the white list of allowed ads like it does for chrome, firefox, etc.
10. Jommick (Posts: 213; Member since: 10 Sep 2013)
Mercury browser is a solid alternative to safari on iOS and it has ad blocker
12. 0xFFFF (Posts: 3806; Member since: 16 Apr 2014)
If you use an iDevice you have to pay the iPenalty.
15. fzacek (Posts: 2350; Member since: 26 Jan 2014)
I hate them so much. They pop up every five seconds and are impossible to close...
41. tuminatr (Posts: 709; Member since: 23 Feb 2009)
use firefox and ad block plus and suddenly no popups
3. ckoch125 (Posts: 191; Member since: 29 Oct 2012)
So they use it to expand like when the att merger fell through
17. engineer-1701d (Posts: 1718; Member since: 13 Mar 2014)
remember att and cingular after it was great and now 1 or 2 tops only because the merg, well dan hess will be gone m.son whats asian style network meaning fast cheaper lots of people like in japan, and john will run it i will still switch next month to tmobile but if it came together we will be grandfarthered in to the speed and stuff.
4. Augustine (Posts: 844; Member since: 28 Sep 2013)
It seems that T-mobile's greatest source of profits is set to be break-up fees.
5. downphoenix (Posts: 2553; Member since: 19 Jun 2010)
I hope Sprint is dumb enough to proceed with it, they deserve the kick in the groin this would be.
7. Totse2k15 (Posts: 293; Member since: 11 Feb 2014)
I like John Legere. He is nice, cool and sexy! I wish him the best if T-Mobile merged with Crapsprint or some [s]hit happen.
11. 0xFFFF (Posts: 3806; Member since: 16 Apr 2014)
All these mergers when the DOJ should be breaking up VZW and ATT and giving the US a fighting chance of not having crippled high cost wireless for the rest of eternity.
18. Doakie (Posts: 1412; Member since: 06 May 2009)
AT&T isn't expensive anymore. We have 4 lines with AT&T with a 10 GB shared plan for $160/month. On Sprints Framily plan 4 lines cost $40 each for 1 GB of data. So $160 with AT&T gets you 2.5 GB each, with Sprint $160 gets you 1 GB each..... How is AT&T expensive still???
19. 0xFFFF (Posts: 3806; Member since: 16 Apr 2014)
ATT is still very expensive. Keep in mind two things. First, that single line prices from ATT and VZW are a lot more costly than the 4 line family plan you mention. Second, even ATT's discounted family plans are more than many other providers.
There is essentially no competition in the US, so prices don't change much, even when basal changes in technology would allow massive reductions in consumer prices.
21. alouden (Posts: 232; Member since: 18 Oct 2011)
Exactly! The first time the Tmobile/Sprint merger was mentioned, I looked at AT&T's pricing. Very expensive for a single line. My sister and her family are about to switch to tmobile and they will save over $100 over Verizon.
22. hockc17 (Posts: 10; Member since: 01 Apr 2014)
AND ATT and Verizon don't have unlimited data anymore, I have how they make you pay for a "pool" of data
24. Adrian38 (Posts: 140; Member since: 05 Nov 2012)
And how long do you think it will be until T-Mobile and Sprint are on the same boat? Sprint is already throttling their customers. Once T-Mobile get's enough customers to give their smaller network a problem, they'll be in the same boat. Then everything will be the same, just as it was before.
32. 0xFFFF (Posts: 3806; Member since: 16 Apr 2014)
The technology doesn't set the price, the telecoms do. Let's look at large data usage.
On EE in the UK, a 50GB single line is ~$126.
On Verizon, a 50GB single line plan is $795 (2GB data for $75/month plus 48GB of overages at $15/GB).
Now if you go with a single device on a Verizon shared plan, you "only" have to pay $375 for the data with a total cost of $415.
Basically the same data costs over three times as much in the US. This is almost all profit for Verizon.
There have been numerous studies of telecom network capacity in the US and other than at peak times in crowded areas, network capacity far exceeds network use.
34. Augustine (Posts: 844; Member since: 28 Sep 2013)
To be fair, the UK is a particularly competitive market, where the prices are as low as a third of those in the US. The rest of Europe is as competitive, though more than the Corporate States of America, where the rates are only about half those in the US (about $10/GB).
Moreover, it seems that many European countries have three or four major carriers as well. However, their populations are fractions of the US population. The US could use at least twice the number of carriers.
Alas, the fact that there are a few huge corporations controlling such a huge market says a lot about the anti-competitiveness of the US and its make-believe free-market. Were the mobile market really free, there'd be many more carriers.
The only free market in the US is in the beltway, where anyone can acquire a senator or a congressman for $20000 and an escort.
44. alpinejason (Posts: 262; Member since: 06 Sep 2011)
sprint doesn't have to throttle their network does that naturally cause it's so slow
26. Augustine (Posts: 844; Member since: 28 Sep 2013)
The same plan on T-mobile, but with 3GB each line, would cost $140; with 1GB each, $100. I'd say that AT&T is now in the same ballpark as T-mobile, perhaps justifiably given its better coverage, but Sprint is quite overpriced.
27. corporateJP (Posts: 2149; Member since: 28 Nov 2009)
Now that T-Mob wants a breakup fee for this deal, Son moves away in 5...4...3...2...1...
28. mike2959 (Posts: 320; Member since: 08 Oct 2011)
Competition does not lower prices. I know most of you guy's on here are a bit younger, no offense, but deregulation of electric company's, phone companies and gas companies has not lowered prices in the last 50 years at all. It has not done anything. Adjusting for inflation, every one of those utilities are MORE today.
Also there's actually MORE competition in the US than ANY other country once you factor in MVNO's.
31. 0xFFFF (Posts: 3806; Member since: 16 Apr 2014)
Contracts, subsidies, and locked phones do not a competitive market make.
When all factors are considered, there is very little competition in the US. The government is basically owned by the telecoms, resulting in regulation that is good for the telecoms and their billions of profits, but not so good for consumers.
This latter situation is similar to the energy business -- pretty much all regulation that is there exists for the benefit of the energy companies, not for consumers.
29. scsa852k (Posts: 319; Member since: 16 Oct 2012)
T-Mobile is on its pace to be nation's third largest carrier by 2015.
I don't see any reason why T-Mo would even think about getting on the sinking ship.