Making Case for T-Mobile Deal, Sprint Says Its Customers Are Fleeing

(Bloomberg) -- Sprint Corp. is unable to recover from crippling losses and has told regulators its purchase by T-Mobile US Inc. would set up a stronger competitor to wireless leaders AT&T Inc. and Verizon Communications Inc.

Customers are fleeing the smallest of the big four U.S. nationwide providers at an increasing rate, Sprint told the U.S. Federal Communications Commission in a Sept. 21 meeting, according to a filing posted Wednesday on the agency’s website.

Revenue is dropping and the company can’t cut much more after eliminating about $10 billion in annual costs. The decline means Sprint can’t afford needed investments, according to the filing. A spokesman for carrier, which is based in Overland Park, Kansas, declined to comment on the filing.

“Sprint has not been able to turn the corner with respect to its core business challenges,” the company said in the filing.

Sprint and T-Mobile have been pitching their deal as a combination of underdogs seeking to compete against AT&T and Verizon.

The prospect of four mobile service providers shrinking to three has triggered concerns about whether consumers will see higher prices and poorer service. The FCC and Justice Department are vetting the transaction, which was announced April 29.

Quarterly Results

Sprint’s commentary is at odds with the brighter picture the company described last month. In August, the company posted its 12th straight quarter of growth in phone subscribers, a winning streak AT&T can’t match. Those results provided an example of robust competition that critics say will go away. Sprint also reported net income of $176 million in the period ended June 30, surprising analysts who had forecast a loss.

There’s a “tension” between what the company is telling regulators in Washington and what it is telling Wall Street, said Blair Levin, a Washington-based adviser to New Street Research. This tactic isn’t unheard of, he said.

Sprint Executive Chairman Marcelo Claure told lawmakers in June that Sprint has lost $25 billion over the past decade and that its path was “simply not sustainable.”

There is “no obvious path to solve key business challenges,” the company said in the filing.

The merger with T-Mobile “will create a much stronger competitor with the scale and resources to disrupt AT&T and Verizon,” according to the filing. Representatives of Sprint and T-Mobile attended the meeting, according to the filing.

As a strategy, presenting a dire picture doesn’t carry any real legal weight in this case, Levin says. “But as a practical matter, this kind of argument is helpful in moving officials toward a yes.”

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