Skip to main content

Internal T-Mobile documents show the company considering a Comcast merger

Internal T-Mobile documents show the company considering a Comcast merger

/

‘The only natural option,’ according to confidential 2015 report

Share this story

John Legere stock 2017
Chris Welch

As T-Mobile’s merger trial inches toward a verdict, it’s clear the company has spent years preparing for a merger with Sprint. But a new report made public in connection with the case reveals T-Mobile has also been preparing for a subsequent merger with a cable company, with Comcast seen as the most likely potential candidate.

Titled “Defining a winning position for the US business model,” the report was assembled at the request of T-Mobile board member Thorsten Langheim in December 2015, meant to give an overview of the company’s market position in advance of a workshop among senior members of leadership. The result is a candid behind-the-scenes look at the company’s strategic outlook, often cutting a sharp contrast to the company’s rebellious “uncarrier” image. (T-Mobile declined to comment.)

The report, which is labeled as “confidential” throughout, suggests T-Mobile owner Deutsche Telecom had bet heavily on the US wireless market, where the company saw less regulation and higher average revenue per customer than in Europe. Analysts also predicted that, as the company reached the limits of its organic growth, it would have to rely on industry-wide consolidation to continue its growth after 2018.

The report also cautions the company against pricing too aggressively in order to maintain those profits and the attendant merger potential. As the final slide puts it, “don’t trigger a price war in the US market (stable ARPUs base drives attractiveness & valuation.)”

A page from the document lays out T-Mobile’s plans for possible mergers
T-Mobile’s plan for possible mergers includes a followup merger with a cable operator after merging with Sprint.

In particular, T-Mobile had positioned itself for a “4>3” merger with Sprint, which it saw as a “natural strategic move” that was being blocked by regulation. As of 2015, however, T-Mobile was uncertain about whether such a merger would be allowed. Tom Wheeler, then chairman of the FCC, was seen as deeply skeptical of consolidation in the wireless market, and the document predicted “consolidation also unlikely under new Democratic administration and only slight improvements vs. today expected under Republican government.”

But even in light of those reservations, the document concludes the company should position itself for two separate mergers — first a consolidating merger with Sprint, then a broader merger with a cable company like Comcast.

The T-Mobile assessment of a Sprint merger urged lobbying the “right” people in DC and warned against “price wars.”
The T-Mobile assessment of a Sprint merger urged lobbying the “right” people in DC and warned against “price wars.”

The “Playbook till 2018” section of the report resolves to “strengthen lobbying for 4>3 merger (i.e. win “right” people in D.C., media campaign).” The same documents caution not to overplay that lobbying in a way that might offend the FCC, Department of Justice, or other stakeholders.

That plan aligns with much of the public lobbying T-Mobile undertook in the years after the report was assembled. T-Mobile CEO John Legere was a growing presence in Washington in the months leading up to the Sprint merger’s approval. He came under particular fire for staying at President Trump’s DC hotel throughout the process, which some saw as a move to curry favor with the administration.

The document also recommends that the company “safeguard and further expand ‘sexy and innovative’ T-Mobile image” as preparation for any potential merger.

T-Mobile’s assessment of a merger with Comcast called it a “preferred merger, ideally after Sprint merger.”
T-Mobile’s assessment of a merger with Comcast called it a “preferred merger, ideally after Sprint merger.”

Still, the document makes clear that Sprint was not the only potential merger T-Mobile was interested in. The same playbook section encouraged T-Mobile to invest in “assets and activities that complement a cableco merger,” and consider partnering with a cable company on an MVNO basis. A later section recommends the company “consider creation of mobile-only video content (i.e. short form) that could be integrated in cableco’s OTT offering.”

Of the cable companies mentioned, Comcast is the clear favorite. “Move into mobile might be the only natural option for Comcast to grow, as preferred Comcast moves (i.e. wireline and content) are unlikely to get regulatory approval,” the report assessed. “Likely no significant regulatory barriers.”

Altice is also mentioned as a potential merger candidate, in what the documents describe as an “opportunistic adjacency play.”

T-Mobile’s notes that EU regulators are focused on enhancing competition and securing consumer welfare, which makes it a less friendly environment than the US.
T-Mobile notes that EU regulators are focused on enhancing competition and securing consumer welfare, which makes it a less friendly environment than the US.
T-Mobile says the US is a friendlier market because of its “very relaxed consumer protection and data privacy policy”.
T-Mobile says the US is a friendlier market because of its “very relaxed consumer protection and data privacy policy”.

The report was presented to executives from both the US-based T-Mobile and the EU-based Deutsche Telekom, and notes that the US market offers much looser regulations — and thus greater opportunities for corporate profits. In particular, the report makes note of the “very relaxed consumer protection and data privacy policy”, as well as the “wait and see intervention” approach of federal regulators.

The documents also cast doubt on one of the central claims of T-Mobile’s merger, which has sought to prop up Dish as a competitive wireless provider, backed by an MVNO deal with T-Mobile in advance of its own network buildout. But the document, which was prepared before the Dish deal was even considered, sees it as unlikely that any MVNO could provide meaningful competition to T-Mobile. The report is particularly focused on cable-based MVNOs like Tracfone, which had garnered a small but growing market share in the US at the time. But the report considered them only a minimal threat to T-Mobile’s business.

T-Mobile lists “Don’t trigger a price war in the US market” as a key point in maintaining merger options.
T-Mobile lists “Don’t trigger a price war in the US market” as a key point in maintaining merger options.

“Telco is a nationwide scale game,” one anonymous expert is quoted as saying. “Without regulatory and telco support it is almost impossible that new mobile entrants will be able to disrupt the industry.”

T-Mobile had initially sought to exclude the documents from the court record on the grounds that they included statements from third-party consultants at McKinsey & Co. that could not be attributed to T-Mobile. However, the state attorneys general successfully argued that the testimony of T-Mobile executive Peter Ewens laid the foundation for the documents, and that they could no longer be excluded from the record.

Today’s Storystream

Feed refreshed 5:33 PM UTC Striking out

A
Youtube
Andrew Webster5:33 PM UTC
Look at this Thing.

At its Tudum event today, Netflix showed off a new clip from the Tim Burton series Wednesday, which focused on a very important character: the sentient hand known as Thing. The full series starts streaming on November 23rd.


A
The Verge
Andrew Webster4:28 PM UTC
Get ready for some Netflix news.

At 1PM ET today Netflix is streaming its second annual Tudum event, where you can expect to hear news about and see trailers from its biggest franchises, including The Witcher and Bridgerton. I’ll be covering the event live alongside my colleague Charles Pulliam-Moore, and you can also watch along at the link below. There will be lots of expected names during the stream, but I have my fingers crossed for a new season of Hemlock Grove.


A
Andrew Webster1:05 PM UTC
Looking for something to do this weekend?

Why not hang out on the couch playing video games and watching TV. It’s a good time for it, with intriguing recent releases like Return to Monkey Island, Session: Skate Sim, and the Star Wars spinoff Andor. Or you could check out some of the new anime on Netflix, including Thermae Romae Novae (pictured below), which is my personal favorite time-traveling story about bathing.


A screenshot from the Netflix anime Thermae Romae Novae.
Thermae Romae Novae.
Image: Netflix
J
Twitter
Jay PetersSep 23
Twitch’s creators SVP is leaving the company.

Constance Knight, Twitch’s senior vice president of global creators, is leaving for a new opportunity, according to Bloomberg’s Cecilia D’Anastasio. Knight shared her departure with staff on the same day Twitch announced impending cuts to how much its biggest streamers will earn from subscriptions.


T
Twitter
Tom WarrenSep 23
Has the Windows 11 2022 Update made your gaming PC stutter?

Nvidia GPU owners have been complaining of stuttering and poor frame rates with the latest Windows 11 update, but thankfully there’s a fix. Nvidia has identified an issue with its GeForce Experience overlay and the Windows 11 2022 Update (22H2). A fix is available in beta from Nvidia’s website.


A
External Link
If you’re using crash detection on the iPhone 14, invest in a really good phone mount.

Motorcycle owner Douglas Sonders has a cautionary tale in Jalopnik today about the iPhone 14’s new crash detection feature. He was riding his LiveWire One motorcycle down the West Side Highway at about 60 mph when he hit a bump, causing his iPhone 14 Pro Max to fly off its handlebar mount. Soon after, his girlfriend and parents received text messages that he had been in a horrible accident, causing several hours of panic. The phone even called the police, all because it fell off the handlebars. All thanks to crash detection.

Riding a motorcycle is very dangerous, and the last thing anyone needs is to think their loved one was in a horrible crash when they weren’t. This is obviously an edge case, but it makes me wonder what other sort of false positives we see as more phones adopt this technology.


A
External Link
Ford is running out of its own Blue Oval badges.

Running out of semiconductors is one thing, but running out of your own iconic nameplates is just downright brutal. The Wall Street Journal reports badge and nameplate shortages are impacting the automaker's popular F-series pickup lineup, delaying deliveries and causing general chaos.

Some executives are even proposing a 3D printing workaround, but they didn’t feel like the substitutes would clear the bar. All in all, it's been a dreadful summer of supply chain setbacks for Ford, leading the company to reorganize its org chart to bring some sort of relief.


E
TikTok
Spain’s Transports Urbans de Sabadell has La Bussí.

Once again, the US has fallen behind in transportation — call it the Bussí gap. A hole in our infrastructure, if you will.


J
External Link
Jay PetersSep 23
Doing more with less (extravagant holiday parties).

Sundar Pichai addressed employees’ questions about Google’s spending changes at an all-hands this week, according to CNBC.

“Maybe you were planning on hiring six more people but maybe you are going to have to do with four and how are you going to make that happen?” Pichai sent a memo to workers in July about a hiring slowdown.

In the all-hands, Google’s head of finance also asked staff to try not to go “over the top” for holiday parties.