The New T-Mobile, if it’s allowed to merge with Sprint, will be in the market for more spectrum as a result of the merger, according to T-Mobile CEO John Legere.
Legere was called to testify in a House Antitrust Subcommittee hearing Tuesday, along with Sprint Executive Chairman Marcelo Claure and opponents of the merger, including the Communications Workers of America (CWA), the Rural Wireless Association (RWA) and others.
Asked by Rep. Ken Buck, R-Colo., if the combined company is planning to buy more spectrum as a result of the merger, Legere said the answer is yes.
“We’re participating in a millimeter wave spectrum auction as we speak,” and there will be a lot more spectrum that’s needed in addition to what it’s going to get with the coming together of these two companies, he said.
“The significant amount of spectrum that we need to run this new company will come from the integration of the low-band, mid-band and high-band spectrum portfolios that we have but there will continually, as 5G advances, be a need to buy” more spectrum and there are government auctions that they’re involved in, he added.
The fact that the proposed combined entity expects to buy more spectrum is not the least bit surprising. T-Mobile was among the qualified bidders in the 28 GHz auction, which wrapped up in January, and it was qualified to bid in the 24 GHz auction, which kicks off tomorrow. The government isn’t identifying the winners of either auction until the 24 GHz auction concludes.
Throughout Tuesday’s hearing, the T-Mobile and Sprint executives were grilled about their plans for lowering prices and hiring more workers as opposed to what usually happens with mergers—the removal of redundant positions and closing rival stores that are right next to one another.
Committee Chairman David N. Cicilline, D-R.I., said he was deeply skeptical that consolidation is the path forward to lowering prices, increasing opportunity, or unleashing competition and that there is mounting evidence that additional consolidation in the wireless market would likely give the combined company the incentive and ability to raise prices, lower wages and abandon the policies that have benefited consumers over the past decade.
“The proposed merger of T-Mobile and Sprint is really a critical test: is the Antitrust Division genuinely dedicated to promoting competition, or does it only oppose mergers when the White House tells it to do so?,” Cicilline said in prepared remarks.
Legere was asked by Democratic lawmakers more than once about his decision to have T-Mobile executives stay at the Trump hotel in Washington, D.C., right after the proposed merger deal was announced and whether it occurred to him that members of the public, the FCC and the president himself might view that as an attempt to curry favor or gain acceptance for the deal.
“I made the decision,” Legere said. “I was and I am 100% sure that this deal will be judged … on its merits.”
When asked how going from four to three major wireless carriers is better for competition, he said the combined No. 3 entity will still be a much smaller economic power compared with AT&T and Verizon, but it will be able to significantly increase supply and bring more competition to the other two.
In addition, cable companies continue to increase their market share in the wireless industry, and players like prepaid MVNO Tracfone represent competition, according to Legere. “But going from two to three makes more sense than just having two,” he said.
“We talk about the U.S. market being a competitive market, it’s not,” Claure said. AT&T and Verizon today have over 70% market share and control over 93% of the cash flow in the industry. “Think about it. How could you compete when you’re competing against two companies that are generating 93 cents of every dollar of profit.”
National security interests also were on the minds of lawmakers. Legere said that T-Mobile does not use any equipment from Huawei or ZTE in the core of its network and has no plans to use them “ever.” The existence of Chinese vendor gear in rural carriers’ networks “concerns us,” he said.
About 25% of RWA’s members have Huawei or ZTE equipment in their networks and there are plans underway to replace it.