The hottest new “TV” company out there just might be a mobile phone provider. More interestingly, it’s not long-time telecom giant AT&T, which bought what’s now called Warner Media for $85 billion back in 2018, and is about to launch SVOD service HBO Max.
No, the potential new video contender is “Uncarrier” T-Mobile, which is coming off a remarkable April, where it finally completed a $37 billion merger with Sprint after two years, three attempts, a court challenge and much other drama.
That would have made April monumental enough in the 13-year history of the Deutsche Telekom U.S. subsidiary. But there’s plenty more going on.
As part of the Sprint deal, for instance, T-Mobile is selling low-end provider Boost Mobile (along with spectrum and other assets) to Dish TV, which hopes to transform from bargain-rate satellite TV company to replace Sprint as the nation’s No. 4 wireless service.
Also this month, “New T-Mobile” issued the year’s largest bond sale, $19 billion, to finance part of the Sprint acquisition. Separately, T-Mobile announced an expected $6 billion in merger savings, named a new CEO to succeed the flamboyant John Legere (with a new CFO on the way), and began offering a free year of Quibi, the just-launched mobile entertainment service.
New T-Mobile’s New CEO, Mike Sievert, said the company would immediately begin “lighting up” more components of its 5G network, which already covers about 200 million Americans.
T-Mobile also has surprised observers by quickly adding loaned spectrum to its network under a federal effort to make underutilized bandwidth available to wireless providers amid the pandemic.
Oh, and there’s that COVID-19 pandemic, which promises to complicate a great many companies’ plans for months or years to come. The continued lockdown and potentially lengthy recession likely will depress consumer appetite for expensive 5G-enabled phones, or the data plans for those networks.
In that regard, T-Mobile may be well positioned. Under terms of the Sprint merger, it already had committed to not raise prices for three years, and not to charge more for 5G access. For bargain hunters wanting to upgrade, it may be the place to go.
As it is, analysts estimate that T-Mobile already typically charges 10% - 20% less than industry behemoths Verizon and AT&T. That may be a big advantage in the 5G rollout, especially if a COVID-19 recession proves durable and deep.
T-Mobile claims its 5G network already covers more than 1 million square miles and 200 million people in 5,000 cities and towns. The initial network is on the 600 MHZ band, and will expand to its big supply of 2.5 GHz spectrum during the Sprint consolidation.
Overall, the merger of T-Mobile and Sprint gives the combined company 140 million connections, putting it between AT&T (166 million subscribers) and Verizon (122 million) in market share.
Amid all this, T-Mobile is continuing to get involved in the distribution of streaming video of various sorts.
For several years now, T-Mobile has given subscribers a free year of Netflix as part of its most popular multiline plans. And before the merger, Sprint gave its customers free Hulu.
Now, new customers are getting Quibi and Netflix Basic for free. When the Quibi deal expires, users will have to decide whether to keep Netflix or Quibi.
T-Mobile also launched its own take on a not-very-skinny bundle, or virtual MVPD, about a year before the merger.
TVision offers 154 channels (in my zip code, before 275 add-ons), 1 terabyte of DVR storage (about 400 hours of recordings), integration with Google Assistant and Amazon Alexa, and access to streaming services and social media. All that costs $90 for the base package, before all those add-ons.
TVision doesn’t break much ground compared to other increasingly pudgy and pricey bundles of traditional TV channels delivered over broadband, such as Hulu + Live TV and Google TV.
What is different, however, is what T-Mobile promises that TVision will become.
“Though currently on wired broadband, we’re planning for a 5G future where wireless broadband will replace home Internet,” the company says on its TVision website. "That means millions across America will finally free themselves from expensive, unreliable cable companies once and for all.”
“Fixed wireless” is what the phone companies call the wireless 5G modems they want to place in customers’ homes to supersede the cable companies’ hard-wired broadband systems.
With 5G, analysts estimate that T-Mobile will be able to realize speed gains of perhaps eight times today’s broadband within a couple of years. Within six years, when T-Mobile plans to finish building out its network, 5G speeds could hit 15 times the current speed of broadband.
That kind of speed and low latency could be a game-changer, enabling everywhere access to everything from augmented/virtual reality experiences to cloud-based video-game streaming to interactive online video, especially if it’s overlaid with data services for pursuits such as sports gambling.
And, as the pandemic is showing, the potential for living-room-based performances, classes, talk shows and more of increasing sophistication and production values are likely to create new kinds of content opportunities.
Fixed wireless in the home, even in homes in the relatively remote communities where some portion of the population is likely to move in coming months, could make all that possible.
The FCC approved the T-Mobile acquisition of Sprint in part because it could help drive 5G adoption, but also because the agency said it could help bridge the digital divide for households not currently served by cable, or unable to afford their neighborhood’s only provider.
Offering most of the goodies of traditional TV with more flexibility on price/delivery pipe/location is one way T-Mobile hopes to entice new customers. It also may help justify the expected $40 billion investment T-Mobile will need to build out its 5G network.
Though Verizon is likely to have an early advantage in the 5G rollout, thanks to a couple of Qualcomm technologies, some analysts suggest T-Mobile may be better positioned over the long run.
The key will be getting all the Sprint spectrum fully deployed, according to Walter Piecyk and Joe Galone of Lightshed Partners. Once in place as soon as next year, that plentiful spectrum should provide T-Mobile with a significant advantage.
“We believe T-Mobile will ultimately execute on this opportunity, but the integration of Sprint, clean-up of the 2.5 GHz spectrum, and changing management team could create a bumpy ride over the next six months,” Piecyk and Galone wrote in a recent report. “The closing of the deal will be a positive catalyst, but what follows next is less certain.”
Wells Fargo analyst Jennifer Fritsche suggested in a report that T-Mobile is more vulnerable to a recession’s depredations, because its business is almost all wireless, and thus more dependent on subscriber growth to drive service revenues.
Over the past five years, T-Mobile stock rose an estimable 176%, thanks to growing subscriber and revenue numbers under Legere, who remains on the company board. It’ll be difficult to match those gains going forward, at least for a while.
The mobile market has matured. Most users have “unlimited”data plans, and they’re upgrading handsets less frequently. The pandemic isn’t translating to more mobile usage as homebound customers watch more streaming video over WiFi on bigger screens. The burgeoning recession definitely won’t encourage splurging.
More importantly, T-Mobile is navigating a 3D chess version of corporate transformation. It’s negotiating a leap to powerful new distribution technologies amid significant political crosswinds, merging complex tech systems, breaking in new top executives, and doing it all amid a world-changing pandemic and recession.
Amid all that, can a remade T-Mobile also become a media power, providing millions of people with fast, cheap, and powerful bandwidth and entertainment wherever they are? Can it be more than just a third-string mobile carrier with a garish brand color and equally noisy (if effective) CEO?
That’s T-Mobile’s next challenge after a prodigiously transformative April. It should be a remarkable year to come.
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