The founder and former CEO of Boost Mobile USA says the proposed T-Mobile-Sprint merger should not happen. Certainly not unless Boost, currently owned by Sprint, and MetroPCS, a unit of T-Mobile, are spun off.
Peter Adderton, who still runs Boost in Australia from his home in Los Angeles, says he’s concerned about the more than 30 million “prepaid” wireless customers who would be consolidated under the new T-Mobile.
Though the distinctions between prepaid and postpaid phone service are getting fuzzier nowadays, prepaid plans tend to cater to more budget-conscious consumers who pay in advance for the service they think they’ll use. MetroPCS, Boost and Sprint-owned Virgin Mobile USA epitomize such brands.
“They’re the challenger brands in the space, and they have the lowest rates, simply because they’re competing with each other so aggressively for prepaid customers,” Adderton says. “Just recently, Boost offered two months of free service for any MetroPCS customer who switched. Only hours later, MetroPCS came out with the same offer. Why would (T-Mobile) do that if they own the two businesses? Why are they going to steal one from the other, literally fishing from the same pond, which is their own pond?”
T-Mobile, the nation’s No. 3 wireless carrier, and Sprint, which is No. 4, agreed to a $26 billion merger in April. But the deal must still satisfy government regulators, which won’t be easy. Critics contend that prices in a post-merger environment would rise and that jobs will be lost.
“What happens when you have five branded stores in a strip mall? Well, you don’t need five,” Adderton says.
T-Mobile CEO John Legere and Sprint counterpart Marcelo Claure have been trying to convince regulators otherwise, claiming the deal will result in more jobs, not less.
Adderton also is concerned about the future of so-called MVNOs (Mobile Virtual Network Operators), mobile companies that negotiate wholesale rates with all the major carriers, including AT&T and Verizon Wireless, then resell service under their own brand names.
“Given that Sprint and T-Mobile are a dominant force in prepaid, they will have a significant incentive to restrict network access to competing MVNOs,” he says. “If the Boost Mobile and MetroPCS brands are included in this merger, it would be bad for the overall competitive landscape, bad for the prepaid market, bad for our country’s MVNOs and bad for the economy.”
He plans to tell lawmakers and regulators just that.
In the meantime, Adderton says he would welcome a face-to-face debate with Legere and Claure to ask them to “explain to me how they intend to manage the Boost-Metro PCS price war, and how do they strategically ensure that we have the competition that we have today.”
Don't bet on such a direct encounter happening anytime soon.
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