T-Mobile Not Interested in Potential Verizon Spectrum Sale; Prepaid Boosts T-Mobile Q1 Profit
The potential 700 MHz spectrum that Verizon’s willing to sell to get regulatory approval of its cable deal doesn’t interest T-Mobile USA, CEO Philipp Humm said during a conference call Thursday. He declined to comment on reports that parent company Deutsche Telekom is discussing with MetroPCS a potential tie-up (CD May 10 p7). The carrier grew its Q1 profit to $200 million, from $135 million a year ago, partly helped by its prepaid subscribership growth.
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Most of the 700 MHz spectrum that Verizon might sell is in the A-Block, and could interfere with Channel 51 TV stations, Humm said. It would probably take up to six years to resolve the interference, if it can be done at all, he said. “The remaining spectrum is in the B- Block, but that’s also only 50 million POPs,” he said. A potential 700 MHz divestiture wouldn’t address the real problem, which is the cable spectrum Verizon would acquire, Humm said. The cable deal would offer Verizon “a lot of very good AWS spectrum” and there’s a need for divestitures of the cable spectrum, he said.
Meanwhile, T-Mobile and parent company Deutsche Telekom are working to strengthen T-Mobile USA’s business and evolve it to become “a self-funding platform,” Humm said, responding to speculation that the company is in talks with carriers like MetroPCS about consolidation opportunities. In the short time since AT&T’s failed acquisition, T-Mobile has redefined and restarted its challenger strategy including a brand re-launch to redefine the carrier in the market, he noted.
The carrier added 187,000 net subscribers in the quarter, a reversal of the 99,000 customers it lost in the year-ago quarter. The results were helped by the addition of 449,000 wholesale customers and 249,000 net prepaid customers. However, the carrier lost 510,000 contract customers in the quarter. Deutsche Telekom’s Q1 earnings were flat at $5.79 billion.
Meanwhile, more analysts weighed in on reports of a potential T-Mobile/MetroPCS combination. A deal would benefit MetroPCS, which “urgently needs more spectrum,” said Jonathan Chaplin of Credit Suisse. T-Mobile has 10-20 MHz of unused AWS spectrum in the markets where MetroPCS needs it, he said. A deal would make sense for T-Mobile also: MetroPCS’s LTE network would cover 100 million POPs, which T-Mobile could leverage to accelerate its time to market with LTE and lower its overall costs, he said.
As evidenced by the rejection of the AT&T/T-Mobile deal, the regulators want to keep four viable national wireless operators, said Guggenheim Partners’ Paul Gallant. T-Mobile potentially merging with MetroPCS would further that goal by strengthening T-Mobile, he said. The measurement of industry concentration would be several hundred points less than the AT&T/T-Mobile deal and is unlikely to raise regulatory concerns, he said. AT&T probably would be able to get regulatory approval if it wants to acquire MetroPCS and Leap Wireless, he said. But AT&T may proceed cautiously in deciding whether to bid for MetroPCS and/or Leap if it plans to acquire Dish Network, he said. Spectrum concentration would be key in regulatory review of a potential AT&T/Dish deal, he said.