Just over a year in, how’s T-Mobile doing on the integration of the Sprint business? According to CFO Peter Osvaldik, things are going pretty good despite having to deal with a pandemic.
Osvaldik said T-Mobile is focused on three strategic pillars on its mission to be the best in the world at connecting customers. First is building the world’s best 5G network. “We’ll be there throughout the duration of the 5G era,” he said. Second is unlocking the scale and cost synergies that the merger provides. And third is delivering the best experiences to its customers.
Of course, integration is a top priority, and T-Mobile executives like to point out that while they had an extended amount of government scrutiny – about two years’ worth because, let’s face it, there was a lot of opposition – that also gave them extra time to prepare for the integration.
One of the silver linings is the ability to come in with a significantly more developed plan, and on the network side, site permitting was under way well before the merger closed. While not a big expense, he said, the local permitting side of things can be lengthy and time consuming.
The pandemic also allowed for the acceleration of retail store consolidation, as stores shut down and then re-opened on a smaller scale with subdued traffic, Osvaldik noted.
“We’re running hard and fast,” he said. The vast majority of the synergies come from the network. The first step is to deploy the Sprint spectrum on the T-Mobile anchor network. Then it’s about migrating the Sprint customers onto the T-Mobile network and de-commissioning the cell sites.
“That has been an area where we’ve done tremendous work,” he said. The expectation is to have about 60% of the Sprint customer traffic migrated onto the T-Mobile network by the end of this year and 100% migrated by mid-2022. “That pace has been just tremendous,” he said, giving props to President of Technology Neville Ray and his team.
Much of this is based on a playbook that was successfully implemented with the acquisition of MetroPCS, but it’s been amended such that the network migration of traffic has been separated from the billing transition for customers, he said.
Because they had seeded the market with compatible handsets, that effectively gave customers with Sprint handsets the ability to use the T-Mobile network right out of the gate, kind of like a roaming arrangement, he said.
Some 8,000 cell sites slated for decommissioning for the latter half of this year are already starting the process – well on the way to a full 35,000, he said. T-Mobile plans to decommission 35,000 macro sites by the end of 2022 and about 7,000 to 8,000 by the end of this year. All of the synergies will be achieved by 2024, leaving it with 80,000 to 85,000 macro sites and about 50,000 small cells.
Asked about increased competition in wireless, “we have a different set of cards,” he said, compared with AT&T and Verizon. T-Mobile has growth opportunities that its rivals don’t have, such as in rural America, he said. T-Mobile executives have lamented how they lagged in coverage in the LTE era but are now starting to fill in a lot of those areas with LTE as well as plans for 5G.
Specifically, when you look at what the competition is doing, “I think you’re nicely saying AT&T is dumping media assets at a huge discount in order to focus on wireless,” he said. “I’m sure they’re doing that because they saw what’s happening… There are smart people at Verizon, AT&T, Comcast and they see what’s happening. They won’t talk about it, but they see what’s happening with this network,” as more consumers see 5G as a reason to switch and T-Mobile as the dominant 5G network.
To be sure, Verizon CFO Matt Ellis at the same investor event earlier on Tuesday said “it’s no secret that everyone else is … targeting our network,” and “we consistently outperform.” In addition, AT&T CFO Pascal Desroches during the conference said that AT&T’s network “has never been better.”
Osvaldik, who was the last presenter of the day, said AT&T has been running “these rich promotions” for about three quarters now, and “we still lead the industry from a profitable growth perspective in net adds.” Despite “the fact that they [AT&T] poured billions of dollars into this,” T-Mobile still delivers the best churn on the T-Mobile base, he said, and it’s the only one that sequentially decreased churn in the first quarter compared with the previous quarter.
Regarding the cable companies, which include Comcast’s Xfinity brand and Charter Communications’ Spectrum, he said they’ve been successful in getting into the wireless market, but they have a small base from which to grow. In addition, “they’re going to be riding on the inferior 5G network for the duration of the 5G era,” he said, taking another dig at Verizon.