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T-Mobile owner sees carrier's finances as unsustainable, while Legere calls it nonsense

Matt Hamblen | Jan. 21, 2015
Outspoken T-Mobile CEO John Legere on Tuesday used Twitter to again slam recent opinions that his company's financial future is unsustainable, given the billions of dollars needed to buy more wireless spectrum to compete with AT&T and Verizon Wireless.

Outspoken T-Mobile CEO John Legere on Tuesday used Twitter to again slam recent opinions that his company's financial future is unsustainable, given the billions of dollars needed to buy more wireless spectrum to compete with AT&T and Verizon Wireless.

Legere tweeted that one such article in Ars Technica was "total [nonsense]" and another article in Gizmodo was "terrible," even though the origins of T-Mobile's lack of sustainability derived from comments made by Deutsche Telekom CEO Tim Hoettges in an interview with Re/code posted Monday. Deutsche Telekom is the parent company of T-Mobile.

In the Re/code piece, Hoettges was never quoted using the word "unsustainable" to describe T-Mobile. However, the article paraphrased him this way: "Longer term, Hoettges admitted that T-Mobile's current approach is not sustainable ..." Then Hoettges says in quotation marks, "The question is always the economics in the long term ... and earning appropriate money. You have to earn your money back at one point in time."

However one interprets Hoettges' comments, Deustche Telekom owns 72% of T-Mobile and for the past five years has been seeking a buyer for its share. In December, Legere dismissed a Computerworld question during a conference call about Deustche Telekom's role in financial decisions at T-Mobile by saying, "They are an owner. I have a very scalable and funded business, and if they are a shareholder that wants to leave, I'm fine."

The irony of Hoettges' recent comment is that T-Mobile went into the black by more than $200 million in the most recent quarter despite its many costly customer promotions, including a $350 bonus to new customers who switch carriers, noted Roger Entner, an analyst at Recon Analytics. "Legere's offering lower prices than everybody else and then his boss [Hoettges] contradicts him," Entner said. "You can't shovel money out the window and then complain. Legere's the corporate reincarnation of an Internet troll."

What matters most in the way Hoettges and Legere regard each other and their financial decisions is how it will affect the overall U.S. wireless market. Federal Communications Commission officials said they prefer keeping T-Mobile and Sprint separate, despite efforts last year to merge them, in order to have four nationwide carriers in place: Verizon, AT&T, Sprint and T-Mobile.

If Deutsche Telekom gradually sells off shares in coming quarters to rid itself of T-Mobile, maybe the carrier can survive. Still it is unclear how the U.S. can keep four national carriers in place.

"The question remains how Deutsche Telekom will get its huge investment in T-Mobile back" said Jack Gold, an analyst at J. Gold Associates. "If they just drop them, it's a big loss on the books."

 

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