MVNO Ting Mobile ends pact with T-Mobile in favor of Verizon, citing merger uncertainty

T-Mobile store (Mike Dano / FierceWireless)
MVNO Ting Mobile is ditching T-Mobile for Verizon, with executives citing uncertainty over Sprint and T-Mobile's proposed merger. (Mike Dano/FierceWireles)

MVNO Ting Mobile said it won’t renew its network service provider agreement with T-Mobile, instead opting for Verizon due to the ongoing uncertainty around Sprint and T-Mobile’s proposed merger.  

In prepared remarks (PDF) Elliot Noss, president and CEO of Ting’s parent company Tucows, explained that challenges and uncertainty about carrier relationships had been hanging over the company since the T-Mobile-Sprint merger was first announced. This year, those challenges turned into problems, Noss said.  

“We had expected that the proposed Sprint/T-Mobile merger would have been resolved by now. If that had happened, we would have been able to engage with the parties and assess the financial implications of potential post-merger relationships,” said Noss in prepared remarks. “However, because the merger has not occurred, we had to assess our relationships with Sprint and T-Mobile separately.”

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RELATED: Dish is in ‘win-win’ situation, deal or no deal: analyst

As a result, Ting won’t renew its contract with T-Mobile when it expires, effective Dec. 19.  However, the company has decided to continue to offer services using Sprint’s network, extending its network provision agreement with the carrier through September 2020.

In terms of continuing the relationship with Sprint, Noss said the economics are competitive and the company has a productive relationship with the carrier’s current team. He noted the extra year gives Ting time see how the Sprint/T-Mobile merger plays out and make an assessment as to what’s best for the MVNO after September 2020.

“A number of factors motivated these changes. With Verizon, we will be adding the network that in our opinion has the best coverage and performance ratings in the U.S. Our contract with Verizon is better than that with T-Mobile in terms of rates, guarantees and other financial terms, which had negatively impacted Ting Mobile’s past performance,” said Noss. “Finally, our dealings with Verizon to this point have been productive and professional. So, long-term, we see this as very positive news.”

Noss indicated that the current agreement with T-Mobile gives Ting until Dec. 19, 2020 to migrate customers off of T-Mobile’s network and onto Verizon’s.

While Ting expects long-term benefits from the move, the decision comes with short-term costs, Noss said. As a result of migration costs, along with under-performance in the mobile business, and carrier penalties, the company decreased its 2019 cash EBITDA guidance (PDF) by $10 million to $52 million.

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“While this was a difficult decision, we believe that we will be moving to a much better network in Verizon, with better economics, better guarantees and a better strategic relationship, all of which sets the stage for stronger long-term prospects for our mobile business,” said Noss. “We also believe we have insulated ourselves, to the greatest extent possible, from the risks associated with the pending Sprint/T-Mobile merger.”

Sprint and T-Mobile are working vigorously to win approval their $26.5 billion deal. The two are reportedly negotiating with the U.S.Department of Justice on concessions that would put a fourth national carrier in place to preserve competition, with Dish Network at the center of discussions.

Last month reports indicated the satellite TV provider was closing in on $6 billion deal to purchase spectrum assets and prepaid brand Boost Mobile from T-Mobile and Sprint. Early this month, CNBC reported that Dish and T-Mobile had come to terms on main aspects of a divesture deal, but regulators still had concerns over competition.

Whether a deal happens or not, Cowen analysts recently said Dish is generally in a "win-win situation" regarding the “treasure trove” of spectrum assets it sits on, estimated to be worth $33 billion.  

“Dish has put itself in a win-win situation,” wrote Cowen analysts, led by Gregory Williams, in a note to investors on Tuesday. “That is, either Dish demands and receives a sweetheart deal (including concession with the FCC on the shot clock and AWS-3 discount dispute), or it walks away. If the deal were to break, both T-Mobile and Verizon could end up paying up for spectrum, turning to the Dish portfolio.”

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