We knew John Legere was a marathon runner. The surprise is how fast he sprints.
Legere’s been moving so fast since he took over T-Mobile in September, it’s hard to see what’s going on at the Bellevue-based wireless giant.
He’s been a magenta blur, zooming around the country, schmoozing with investors and trash-talking competitors, especially one of his former employers, AT&T.
Maybe it’s time to pause and take a closer look, now that T-Mobile’s merger with MetroPCS is done and its stock listing is complete.
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Nearly 30 years after it was spawned by veterans of McCaw Cellular, T-Mobile is the largest player left in a region where the modern wireless industry began in the 1980s.
Broadly, T-Mobile remains the fourth-largest U.S. carrier behind Sprint, AT&T and Verizon. It’s approaching the size of Sprint, but Sprint’s likely to accelerate after it completes a merger of its own later this year.
Locally, T-Mobile’s been relatively opaque under its German ownership for the last decade. It’s known mostly as a large and low-profile employer and a provider of relatively cheap and decent wireless service.
Perhaps that will change now that T-Mobile’s a stand-alone company.
T-Mobile is one of the largest public companies in the Northwest, with a market capitalization about the size of Nordstrom and double the annual sales of Starbucks.
Wall Street’s still trying to make sense of the company. Analysts generally expect its stock to climb — the median target is $22 among 16 surveyed by Thomson/First Call, up from the $17.50 where it closed Friday.
Some are hoping another merger pushes up the stock. There’s a frenzy of deal making in the wireless industry. T-Mobile’s national footprint and spectrum holdings could draw a foreign suitor, similar to the way Japan’s SoftBank is trying to acquire Sprint.
If the Sprint deal goes through, SoftBank may try to acquire T-Mobile as well, Issaquah wireless analyst and consultant Chetan Sharma said. Dish Network may also try to acquire T-Mobile, or perhaps another foreign suitor will appear. One way or another, Sharma expects T-Mobile to be acquired within perhaps two years.
That’s why Goldman Sachs last week issued a buy rating on the stock, expecting it to reach $22 within a year.
“Following a recent wave of consolidation and desired entry of new parties in US Wireless, we believe T-Mobile is likely to attract similar interest, and in fact, could offer the last chance for a new strategic entrant looking to control a nationwide wireless network,” it said in a research note.
That would please investors but put T-Mobile’s thousands of employees back on the roller coaster of uncertainty they’ve ridden for two years, through AT&T’s failed acquisition, restructuring, layoffs and the MetroPCS deal.
Without a merger, T-Mobile may have a tough time growing its business. Competition has intensified as the market has become saturated, Morgan Stanley analyst Simon Flannery noted in a report on Friday.
While T-Mobile is expecting to grow 5 percent a year, on average, over the next five years, Flannery is expecting 1 percent growth.
One area of concern is that T-Mobile’s signature “no contract” plans and lower prices are going to be challenged with aggressive offers from competitors such as AT&T, which is preparing to offer a $50 per month prepaid plan with 2 gigabytes of data, Flannery wrote.
The big challenge is that the go-go days of wireless growth are over. Only 2 percent of carriers’ sales are now coming from new subscribers; most of their business is with existing customers or stealing subscribers from each other, Sharma said.
“There’s very few new subscribers to be had. It’s all about how can you keep the subscribers, versus getting the new subscribers,” he said.
The wild card may be Legere. He’s been there before. A decade ago he went through a more intense period of turbulence leading fiber-optic network carrier Global Crossing through a downturn, drastic cutbacks and a bankruptcy reorganization.
After a quiet start at T-Mobile, Legere emerged with flair at the Consumer Electronics Show in January, winning over the national media with his black T-shirt, sassy tone and monthly plans offering unlimited data access.
He delivered an encore in New York in March, rolling out his “Uncarrier” approach with simplified, month-to-month contracts, the launch of its 4G LTE service and a device lineup anchored by the iPhone 5.
But Legere found a tougher audience back in Bellevue, where he aggressively cut costs and laid off nearly 500 headquarters employees before the merger closed.
To cap it off, the state attorney general last month demanded T-Mobile change ads trumpeting its “No Contract” plans to make it clear some strings may be attached.
Meanwhile I’ve heard from several longtime customers reporting that the company seems more persnickety about things like replacing phones, in contrast to the Nordstrom-esque service they’d received in the past. Perhaps that’s less of a priority when you’re no longer selling long-term contracts, hustling to sell month-to-month plans and pushing for profits in your Wall Street debut.
I think it’s still early to say how Legere is changing the company. He’s barely had a chance to catch his breath. He arrived after the MetroPCS deal had begun and quickly raised T-Mobile’s profile ahead of its LTE and iPhone launches.
Perhaps now he’ll be able to slow down and spend more time around here, absorbing some of the character that infuses the area’s iconic companies.
T-Mobile’s local peers — Microsoft, Starbucks, Costco, Nordstrom and Amazon.com — are all led by executives who no longer worry much about establishing their identity.
They all take a long view toward building their businesses and relationships with customers and employees. Even if it means ignoring Wall Street demands to cut nickels and dimes to improve the next quarter’s earnings.
Then again, maybe it’s a different game for Legere and T-Mobile. It may really be a sprint — not a marathon — toward another merger that’s just around the corner.
Brier Dudley’s column appears Mondays. Reach him at 206-515-5687 or email@example.com