Company / division: Sprint
Charter Says it Doesn’t Want to Buy Sprint (Jul 31, 2017)
There were lots of reports over the weekend that Sprint and Charter were approaching a tie-up, just after the end of the exclusive negotiating period between the two and Comcast which began just over a month ago. However, Charter has now come out and said that it’s not interested in buying Sprint, which isn’t necessarily the deal being discussed, but is as close as Charter can get to saying it’s not interested in any deal, given that it has a fiduciary responsibility to keep the door to potential acquisition offers open. It’s been fascinating to watch this latest round of SoftBank-driven Sprint merger mania, because whereas last time Sprint was to merge with another player (T-Mobile), it was the US government that shot it down. This time around, the biggest barrier is a lack of willing partners. T-Mobile is certainly far less in need of the merger now than it arguably was several years ago, while the cable companies may well want to merge with a wireless industry, just not the weakest of the big four US providers. Sprint has the poorest network, the poorest financial performance, the lowest overall subscriber growth, and the least subscribers of any of the big four operators, making it the least attractive merger partner of the four, with T-Mobile much more enticing at this point. It’s still possible that SoftBank will try to buy Charter, and if the price is high enough that Charter’s management will feel they have to accept the offer, but it’s clear at this point that this will happen against their stated wishes, which will make any merger process that much more challenging than it would already have been.
Jay-Z, one of the principal owners of the Tidal music streaming service, released his latest album, 4:44, on the service last night through a partnership with Sprint, which of course recently invested in the service and gave its subscribers six months’ free access. The intent was clearly to get more people to sign up for the service, while rewarding Sprint customers, but the effect was to aggravate many others who assumed they could merely sign up for the service after the album dropped and then found that it wasn’t available, at least right away. In addition, the exclusive seems pretty porous, and potentially short-lived: iHeartRadio has been streaming the album and will continue to do so for the first day, while Apple Music is reportedly getting the album a week in too. That’s a reflection mostly of the realities of the industry: though Jay-Z and Tidal’s other owners might like the idea of boosting subscriptions through exclusives like this, the reality is that the service has a tiny fraction of global streaming users, and over the long term Jay-Z and other artists are best served by the broadest possible distribution, especially given that he can’t pay himself for the exclusive in the way Apple has paid for them in the past. Exclusives generally seem to be waning as a source of differentiation for music services, but for Tidal its connection to artists (several of whom have been owners) has always been a major selling point. But if even its artist owners aren’t willing to stay the course on exclusives for more than a few days, it doesn’t have much hope of ever reaching significant scale, making the Sprint investment more of a temporary lifeline than true salvation.
Sprint’s Virgin Mobile Goes iPhone-Only in Relaunch (Jun 22, 2017)
Sprint Offers 6 Months of Free Tidal HiFi to Subscribers (Jun 9, 2017)
Sprint and T-Mobile Holding Informal Merger Talks (May 12, 2017)
The FCC recently held an auction of spectrum to be freed up by broadcasters and made available for wireless services, in the 600MHz band, which is well suited to long-distance and in-building coverage. T-Mobile was the only wireless carrier among the big winners, with the two largest carriers having cleaned up in the previous auction, and a cash-constrained Sprint sitting this one out too (AT&T did win licenses worth $900 million, but T-Mobile spent $8 billion). The other big bidders were DISH, which spent nearly as much as T-Mobile ($6.2 billion), and Comcast, which recently announced its wireless service based on Verizon’s network but could eventually launch its own network. Though T-Mobile has always crowed about how much spectrum it has per customer, that was always more of a reflection of its smaller number of customers rather than a massive spectrum trove, and it lacked low-band spectrum. It has now made big strides in solving that problem, and plans to put at least some of that spectrum to work right away (though much of it will be unavailable for several years while the broadcasters go through the process of vacating it, with much of that unavailable spectrum covering the densest markets). It’s also worth noting that no phones in the US today support the 600MHz band – that support is likely to come early next year with a new Qualcomm modem, so even if T-Mobile does put a third or so of its new spectrum to work this year, it won’t do anyone any good until then. So, if you’re a US wireless customer today, none of this makes any difference for now, and it’ll only make much of a difference a year or several down the line if you’re a T-Mobile customer (or in limited cases an AT&T customer). Or as and when Comcast and DISH decide to put that spectrum to use.
There were reports earlier this week that Sprint was ditching its 50% off promotion, which has run since 2015, and it has now confirmed that news. Instead, Sprint is now focusing exclusively on unlimited services, ditching its tiered plans as well, and offering a $10 per line discount through June 2018 on new plans, making them in some cases 30-40% cheaper than equivalent Verizon or AT&T plans. Sprint’s 50% off plan became untenable when the two larger carriers reintroduced unlimited plans, because in practice under the promotion Sprint had seen most customers keep their spend at the same level as at their previous carrier while moving to a higher speed tier, which isn’t possible when switching from unlimited, meaning Sprint really would be charging 50% less for the same service. Instead, then, it’s competing on price in a less dramatic way going forward, but it’s worth remembering that price discounts in wireless have a direct correlation to perceptions of network quality. As such, these ongoing price discounts are a recognition that Sprint can’t be competitive unless it’s charging quite a bit less than competitors, because of poor perceptions of its network, perceptions that are unlikely to change at its current historically low network investment levels.