Mobile Future

Has T-Mo Jumped the Shark?

He’s baaaaack.  T-Mobile CEO John Legere and his infamous leather jacket were once again making the rounds on Capitol Hill and at the FCC last week in a last-ditch effort to further expand the favorable treatment his company will enjoy in the upcoming broadcast spectrum auctions.

For a self-proclaimed ‘uncarrier,’ Mr. Legere sure is spending a lot of time inside the beltway with his company’s tin cup in hand. It makes sense given the tall order he’s after: Convincing government officials to set aside even more spectrum for T-Mobile to acquire without competing in the bidding process with national rivals, Verizon and AT&T.

A quick review of his message to Wall Street makes it hard to see why T-Mobile would need an even higher leg up from the government.  In Q1 2015, T-Mobile added 1.8 million customers essentially, as Mr. Legere crowed, capturing all of the industry’s postpaid customer growth. Hardly an anomaly, this marked the 8th consecutive quarter the company added more than 1 million new customers.

Equally verifiable, the company’s certainly not short on cash. It spends lavishly to lure new customers—buying out their contracts and paying off their phones. It was modest with its bidding in the recent AWS-3 auction, noting his company was “able to be pretty conservative and strategic in this auction.” And, with its global parent, Deutsche Telekom, T-Mobile has a combined market cap of about $110 billion. That’s larger than Ford, GM, Yahoo and Target.

Legere’s insistence that the government essentially rig a portion of the auctions to guarantee his company walks away with additional low-band spectrum at a steep discount also stands in stark contrast to both T-Mobile’s highly competitive spectrum position and the claims it makes to its customers.

The company spends millions in its advertising claiming coverage of 96% of the nation (sorry rural America) with “the nation’s fastest 4G LTE speeds.” T-Mobile also claims to have “more data capacity than AT&T or Verizon” on a per-subscriber basis. While some of this is clearly marketing bluster, a recent Goldman Sachs review of the four national carriers’ spectrum holdings plainly shows that when it comes to bandwidth suited for 4G LTE deployment, T-Mobile (and Sprint) have had no issue competing effectively for these assets. In fact, both companies currently have an edge over AT&T and Verizon (see chart below).

Spectrum Capacity chart

Is T-Mobile behind in low-band spectrum? Sure.  But what Mr. Legere conveniently edits out of his Periscope frame is T-Mobile’s own culpability. When low-band spectrum last went on the block in the 700 Mhz auction, his company sat on its hands. That questionable business decision makes the company’s current demands that the FCC help it play catch-up look less like a handout and more like a bailout.

And, T-Mobile’s spectrum position is about to get a lot stronger if news reports are true and the company merges with DISH. The two companies are kindred spirits with their shared predilection for gaming the system. In the recent AWS-3 spectrum auction, DISH walked away with 44% of all licenses offered—despite not having a single wireless customer or mobile service offering. Adding insult to injury, DISH’s exploitation of rules intended to assist small companies allowed it to secure its spectrum windfall at a 25% discount, essentially fleecing the U.S. Treasury of an estimated $3 billion.

The FCC is working diligently to ensure future auction set asides cannot be similarly exploited. It should be equally resistant to T-Mobile’s request for further favoritism. Already, the FCC has made a huge concession in its incentive auction rules, allowing T-Mobile—which claims to be the nation’s third largest wireless company—to join the ranks of “small carriers” eligible to compete for up to 30 MHz of spectrum that the auction rules bar Verizon and AT&T from pursuing.

That exclusionary move was highly controversial, but the FCC has already resolved this issue. Further capitulation to T-Mobile’s self-serving quest would be patently contrary to the public interest. Showing up in Washington with your hand out is hardly a new move. But it’s a particularly jarring one coming from such a self-styled renegade.  T-Mobile celebrates its strong spectrum position today and is well-positioned to make it even stronger. This leaves no credible case for the FCC further tilting auction rules in its favor. Like a latter-day Arthur Fonzarelli on his water skis, Mr Legere’s efforts may have finally and officially jumped the shark.