Jarich: MetroPCS, T-Mobile and the question of 'culture'

Current Analysis Peter Jarich

Peter Jarich

By now, if you haven't seen all the news and analysis surrounding the pending merger between MetroPCS and T-Mobile USA, you either lost access to your PC earlier this week or you just don't care. Every media outlet has taken time to rehash the details, weigh in on the rationale and place some wagers on regulatory approval. 

In the hours after the news broke, our consumer team went over all these themes as we attempted to tease out the competitive implications of the deal. In the back and forth process, a few things were broadly agreed on. The role of spectrum, the importance of a shared focus on value and our sincere hopes that Carly remains the new company's spokesmodel. One topic, however, generated its fair share of debate: culture. On the one hand, some of the team argued that the merger and future management of the company is bound to be plagued by a culture clash given the two companies' diverse parentage; I characterized this as the, "let's make New Braunfels, Texas, the new corporate HQ in order to tap the best of German and Texan heritage" view. On the other hand, there was the argument that big companies successfully merge all the time, with culture being overpowered by basic management principles; I called this the "everyone comes out of B-School as an automaton, driven forward by identical business logic" viewpoint.

As always, the truth is probably somewhere in between the two. Yet, while it's still too early to know which one might win out, there are a few things worth thinking about as we try to parse the topic.

  • Everything's Easier When You're Winning. When I think of major international telecom mergers or partnerships, two come immediately to mind: Alcatel-Lucent and the joint-ownership of Verizon Wireless by Vodafone and Verizon. Joint ownership of Verizon Wireless has resulted in its share of squabbles (stuff you see in the media from time to time) but nothing that's derailed the company. Alcatel-Lucent, on the other hand, went through its share of culture clash early on in its life. While this is largely a matter of history now, the difference in culture was palpable according to people I know who worked for the vendor at the time. While we're talking vendor vs. operator and merger vs. joint ownership, there's another major difference here. Verizon Wireless has generally operated from a position of strength while Alcatel-Lucent has struggled. When market share is eroding, budgets are being slashed and layoffs being made, it's a lot easier to let cultural differences get in the way. Likewise, when the company is doing well, it's a lot easier for one owner to remain hands off, helping avoid culture clash.
  • Culture is more than Country. The Alcatel-Lucent merger is instructive for another reason. While most people talked up the issue of a French company and an American company coming together, it was a mistake to think that culture stopped at a national boundary line. Consider the fact that Alcatel had major success with lots of smaller operators while Lucent was best known for its work with a handful of major ones. You don't think that affects the way a company operates and how it sees itself? Yes, the location of a company's HQ impacts its cultures. So does its focus on values, rules and its vision of competition, its customers and itself. Conflating culture and nationality or regionalism is a mistake…unless you think every company with a HQ in Dallas, or San Jose, or London has an identical culture. 
  • It Takes Time. It Takes Leadership. I'm not an expert on corporate culture; you've probably figured that out by now. What I've seen, however, is that--for all of its power--culture is not immutable. It can be changed or evolved. Walmart, for example, embarked on a plan to evolve its "rules-based" culture to a "values-based" culture. Huawei, similarly, is actively looking to counter a top-down, fast-follower culture with a focus on innovation coming out of locations such as its Silicon Valley offices. None of this takes place spontaneously. It needs to be driven. It needs to be driven from the top of an organization--where agendas are established and examples are set.

So, where does this leave MetroPCS and T-Mobile?  Unfortunately, there's no real answer.  A joint focus on the "value" segment of the market is good. So, too, is a challenger mentality. Yet, while a focus on Texas vs. Germany dynamics is somewhat foolish (T-Mobile USA has its own history and identity), any cultural differences will likely only be magnified should things get "rocky" in terms of financials and subscriber growth or the new management fails to establish (exemplify?) its vision of the new corporate culture.

Peter Jarich is the VP of Consumer and Infrastructure at Current Analysis. Follow him on Twitter: @pnjarich.

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