Legere Says Sprint Is in Worse Shape Than T-Mobile Ever Was
(Bloomberg) -- The judge deciding whether T-Mobile US Inc.’s planned $26.5 billion takeover of Sprint Corp. would reduce competition expressed skepticism about one of the companies’ central defenses: that Sprint is doomed without the deal.
U.S. District Judge Victor Marrero, who is presiding over the trial of an antitrust lawsuit brought by U.S. states seeking to block the merger, asked T-Mobile Chief Executive Officer John Legere on Friday why Sprint couldn’t turn itself around. Legere has credited his own leadership with rescuing T-Mobile but claimed a merger was needed to save Sprint, Marrero noted.
“The implication is that if T-Mobile is able to achieve this upheaval and overhaul, why not Sprint, without the merger?” Marrero asked the CEO on the fifth day of the two-week non-jury trial in Manhattan.
Legere said there’s no comparison.
“The financial situation that T-Mobile was in was dire, but nothing compared to the distress that Sprint is in at this point in time,” he told the judge.
Sprint doesn’t have the same financial backing or the shareholder support that T-Mobile had at the time, Legere testified, adding that Sprint would be “sold for parts” without the merger.
The carrier has posted an annual net loss for four of the past five years and has accumulated $44 billion in total debt.
“If T-Mobile can’t prevail in Judge Marrero’s court, the next time we see Sprint might be in bankruptcy court,” said Walt Piecyk, an analyst with LightShed Partners LLC.
The challengers are trying to show that the merger would reduce the wireless market from four major players to three, slashing competition and driving up prices. The attorneys general of 13 states and the District of Columbia, all Democrats, filed the lawsuit in June.
Marrero asked Legere why a post-merger T-Mobile wouldn’t simply become one of the market leaders he mocks, Verizon Communications Inc. or AT&T Inc., using the analogy of “flower children” in the 1960s growing up to become “investment bankers on Wall Street.”
“That’s a club that they wouldn’t let me join even if I wanted to,” Legere responded. “I’m probably the most hated person by those two players on the planet.”
Legere said he didn’t see the companies that would remain in the industry after a merger of T-Mobile and Sprint “holding hands and singing Kumbaya.”
The 61-year-old CEO, who is to be succeeded by President and Chief Operating Officer Mike Sievert in May, also defended a January 2017 text exchange with representatives of Deutsche Telekom AG, T-Mobile’s majority shareholder, in which he said the “regulatory environment will never be better” for “4 to 3.”
In many industries, mergers which shift the number of major competitors from four to three typically receive added scrutiny.
Legere said his use of the phrase was intended as lighthearted “cheerleading” for the benefit of Thorsten Langheim, the head of Deutsche Telekom’s U.S. business, who was having a “tizzy fit” about the deal’s prospects. Legere said it was Langheim who started using the phrase to discuss the Sprint deal.
The trial comes more than a year after T-Mobile and Sprint announced their deal, claiming together they could better compete with Verizon and AT&T while speeding deployment of the next generation of wireless technology known as 5G.
The case is 19-cv-5434, U.S. District Court, Southern District of New York (Manhattan).
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