T-Mobile feels ‘very good’ about merger prospects

T-Mobile earnings call
T-Mobile CEO John Legere said the carrier continues to have "very good discussions" with states around their concerns about 5G, pricing and Dish as a competitive player. (T-Mobile)

T-Mobile shared a few more details about its planned 5G rollout using its 600 MHz spectrum this year, as executives remained bullish that its merger with Sprint will close in the first part of 2020.

That merger still must survive a lawsuit by more than a dozen states; that trial starts Dec. 9. T-Mobile CEO John Legere said the company continues to have discussions with the states, and indicated those discussions have been centered around the buildout of 5G, pricing and Dish Networks as a competitive player.

“We feel very good about the conversations and where they're headed, and we feel very good and confident either in the process of a settlement or even going to trial,” he said during Monday’s conference call to discuss third-quarter results. 

He also teased that on Nov. 7, it will announce the first “un-carrier” move for the New T-Mobile, sharing some of its commitments for a future where it’s allowed to merge with Sprint. “As we work through the final steps of closing our merger, we remain convinced that the merits of the deal are even more true today,” he said.

Last week, T-Mobile announced that it’s launching 5G ahead of time and plans to leverage a foundation layer using 600 MHz and covering 200 PoPs before the end of this year.

On Monday's call, CTO Neville Ray was given props for the work of his engineering team for stepping up the pace and covering nearly 8,300 cities and towns, covering 1.3 million square miles. Some 26 million customers now have a 600 MHz phone in their hands.

RELATED: T-Mobile to cover 200M people with 5G this year

Still, Ray was asked during the Q&A portion of the call about getting to the next 50 million PoPs over the next few quarters.

“No slowdown on 600 megahertz,” he said. Moving into 2020, that buildout will continue, and it’s nationwide spectrum that its leveraging. “Big, big push on rural for us within this footprint,” he added.

“We've been building this thing almost from the outside in, because we have to clear broadcasters in the major metros that were sitting on that spectrum... Much of that work done now, we're ahead of the schedule materially compared to the original schedule that was put in place in partnership with the FCC three years ago, and so real great benefit coming through not just in metros, but across the country and specifically in rural… We’re building now, we're building through the quarter, and we'll be back at it again in 2020.”

Interestingly, Ray was asked about a Plan B if the deal with Sprint isn’t approved, and T-Mobile needs to find mid-band spectrum somewhere else, like the C-band.

Ray said: “I’m not sure my head even floats there… there’s only one plan, and that’s combining with Sprint.”

In some ways, he said, time has been T-Mobile's friend, in that while the deal is taking longer than expected, his team is more prepared than ever to rapidly roll out the 2.5 GHz spectrum that Sprint holds as soon as they get the green light.

Legere also declined to answer a question from analyst Craig Moffett about the impact on the merger due to Sprint’s Lifeline accounts, which could be as much as a $5,000 per account or per line penalty if it’s found to be fraudulent, which Moffett estimates could be up to $4.5 billion.

Later, Legere said, “I'm sure you probably didn't expect us to really answer some of these questions,” adding that T-Mobile has been partners with Sprint for a long time and working side-by-side in a “very cooperative” way.

“They've been a great partner and if there are issues that we need to work together, we'll work together with them to solve those,” he said.

‘Blockbuster’ quarter

The company boasted that it completed another “blockbuster” quarter, delivering strong customer growth, and in the third quarter of 2019 set a record of 26 consecutive quarters of more than 1 million total net customer additions.

T-Mobile’s postpaid churn was a record low for the third quarter, coming in at 0.89%. It tallied 754,000 branded postpaid phone net additions in the third quarter and 62,000 branded prepaid net additions.

Net income in the third quarter was $870 million, up 9%, and the company raised its guidance for the year for branded postpaid net additions to 4.1 million to 4.3 million, up from prior guidance of 3.5 million to 4.0 million.