John Legere not impressed by press reaction to DT chief comments

t-mobile-john-legere-big-eyes

Yesterday, Tim Hoettges, CEO of Deutsche Telekom, made some forward-looking comments in an exclusive interview with Re/code. DT – of course – holds the controlling stake in T-Mobile US. The comment which seemed to spark the biggest reaction was “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.”  

Re/code expanded: Longer term, Hoettges admitted that T-Mobile’s current approach is not sustainable, especially given the need to invest between $4 billion and $5 billion each year just to keep up.”

Personally, I don’t think the comment was anything other than stating the obvious. T-Mobile – although growing its service revenue consistently over the past few quarters – is yet to return to being a profitable business. It’s investing heavily in spectrum and network expansion, and offering competitive prices. If the Un-carrier moves continue not making profit for T-Mobile long-term though, then a change will – of course – be necessary. Number 1 rule of business is making money. And I’m sure that’s a fact not lost on John Legere. It’s also not lost on him that T-Mo is going from strength-to-strength.

Still, the way a couple of publications reacted to yesterday’s story ground his gears. Specifically, this one from ArsTechnica and another from “Geezermodo”.  When asked on Twitter about the two stories, T-Mo’s CEO called them out as BS:

In all of this, it’s worth remembering previous comments made by the Deutsche Telekom CEO about T-Mobile’s strategy, calling it “one of the most impressive marketing stories I have ever seen”.

What do you make of all the reactions to the story? Is it blown out of proportion? Does T-Mobile really need a buyer to survive?

Sources: ArsTechnica, Gizmodo, Twitter

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  • archerian

    well, JL knows who’s boss and who to suck up to correctly.. no mistake there… if SOMEONE else said the same thing he would be all over them spewing his caustic words..

  • sushimane

    interesting article but i can still see tmobile as the underdog that can go toe to toe with anyone in the long run not in the short term. with every passing proved transaction of 700 mhz its one step closer to nationwide coverage then what it already has. but business is all about making the money and raising rate plan to get more profit which is fine. When the big 2 carrier do its crazy Taking a arm and leg. Im happy with tmobile and what it’s doing more bang for the dollar a truly a value leader and actually cares about their customers.

  • UMA_Fan

    I think what we’ll see this year is Verizon and At&t stock prices going way down due to their revenues falling in order to compete. On the flip side T-Mobile will likely be the only carrier in the US with RISING service revenues (they are already) and customer growth.

    The key to even more explosive growth will be in the 700mhz spectrum and Apple finally supporting it.

    • sushimane

      Yeah that’s what I’m saying with every approved 700mhz transaction tmobile gets a leveled field in coverage and penetration. And maybe tmobile usa would break away from dt ;p lol

    • Mr Paul

      When some of the biggest and important metro areas like NY, LA, San Jose, Phoenix, Research Triangle NC, Chicago, Orlando, etc. get approved, and THEN moved, and THEN they start building 700MHz, I’ll even consider rethinking T-Mobile isn’t remotely a choice for TENS of MILLIONS.

      • socalrailroader

        Again, you’re apparently unaware a lot of people live outside those cities, and still more work and play in them, the world exists beyond hi rises and overcrowded cities.

        • Mr Paul

          You obviously don’t read what I say. I am complaining about exactly what you accusing me of disregarding. What do you think a METRO AREA is? I am talking about OUTSIDE of cities. Suburbs and commuter towns. Huge, huge areas too. Most people seem to think there’s big cities, little suburbs, and then farms. It isn’t 1930 anymore.

      • Nope

        I live in one of those “important metro areas” — New York City — and have had all four major carriers. Guess which carrier gave me the best coverage in my downtown Manhattan office building off of Wall Street as well as the consistently fastest data speeds?

        Little ole T-Mobile.

        Guess which carrier offers the overall best experience in Los Angeles, as measured by Root Metrics?

        T-Mo.

        In Chicago, San Jose and Phoenix, I’ve gotten consistently good service on T-Mobile too… the unlimited LTE service that AT&T simply refuses to offer, and with speeds that leave Sprint choking in the dust.

        No, the numbers in those regions show that not only is T-Mobile an “acceptable choice for tens of millions in those areas,” but it’s often the best choice. That’s why they’re taking so many customers from Sprint and AT&T.

        Spectrum auction stuff is propellerhead geekery. In real world usage, T-Mo is pretty good most everywhere, and they have all sorts of options that the others don’t offer (including WiFi calling).

        • Mr Paul

          Try getting coverage inside buildings. And, I am not talking about NYC, I am talking about it’s surubs are commuter towns. When I say a metro area, I mean not just cities, but the subrubs and commuter towns. That’s what makes up a metro area…

    • Cayden Griesbach

      I doubt the stock price will go down that much next year especially at&t where they bought lusacell and directv. those two companies will help them not decline in stock but grow and keep high dividends for investors.

      • Mr Paul

        Not to mention AT&T has plans to install boosters, macrocells, AWS/PCS depending on spectrum, VoLTE with interoperability with Verizon, and I’m presuming within the next few months we’ll hear about Wi-Fi calling too. Their originally 14 billion dollar investment plan that started in late 2012 is not even expected to be done until the end of this year.

        • Cayden Griesbach

          Yeah att won’t be spending so much the next couple of years like they did for the past couple of years and that will help investors who rely on those high dividends

  • Austin

    They’re losing money because they’re trying to get their network reach up to par.

    After our network is fully expanded, there’s no reason why we wouldn’t lead by volume

  • monkeybutts

    Spectrum and upgrades are the biggest parts of T-mobiles growth. When they get LTE to places that don’t have it they will get more and more valuable customers whether prepaid or postpaid.

  • TK – Indy

    The bar is not survival, of course they can survive as they are. Companies are required to show growth and income for their investors. They are halfway there, so far. The problem is that to continue to show growth will require a continued investment of $4-$5 billion per year, by DT estimates. No one is going to continue to give them that without showing the income that would be necessary to pay it back. That is the problem.

    • RiskyBidThis

      That number sounds scary until you realize that they as a company have revenues of above $26 billion (and rising rapidly). They plan to show positive cashflow this year and that should only improve going forward as the MetroPCS shutdown concludes and additional customer growth boosts their revenue further.

      TL;DR: $4-5 billion mostly isn’t borrowed money, rising revenues make it almost a non-issue.

      • TK – Indy

        They have borrowed almost exactly $5 billion this year. They have had positive operating cash flow all along, but not nearly enough to match investments in spectrum and capital. DT seems worried, I don’t see how you can know more than they do.

        • TechHog

          If DT were “worried”, they’d invest in T-Mobile. They simply don’t care as long as they can sell it at a high price ASAP.

        • RiskyBidThis

          A significant chunk of that amount was refinancing existing (higher interest) debt and another significant chunk was to pay for AWS-3. Spectrum costs drop off a cliff after the 600MHz auction in 2016 assuming no broad new swath of spectrum presents itself for purchase.

          They’re far from the point where interest expenses become a real concern.

  • mattymattmc

    If it continues to grow customers it can be profitable. I would gladly make a dollar off a billion people then twenty off a million. Especially, after the network catches up, no Tmo’s fault the big 2 are sitting on spectrum they don’t need!

  • Chriz

    IMO, Deutsche Telekom doesn’t understand long-term success, they only want short term dolla dolla bills. After Tmobile’s network expansion, which is what’s using all their money, then there won’t be a huge money sink. It may not be a typical business strategy, but… Isn’t this *uncarrier*? Deutsche Telekom needs to understand the world doesn’t revolve around doing anything to make money. It revolves around a company doing what it needs to in order to survive the long haul, which is *exactly* what Tmo USA is doing.

  • Henry Pham

    DT executive, like an activist investor, was just lobbying the FCC so he could try merger again to double his investment the quick and dirty way. Otherwise he’s ecstatic with Tmo’s success.

  • Mr Paul

    Of course T-Mobile can’t survive like this. In order to keep upgrading base stations at their pace, converting 700MHz like mad (you know they want 700MHz desperately at the pace they’re starting to pump it out), and building towers in mostly unimportant areas, and not even touching areas they need to build; they’re going to go bankrupt like Sprint and NEED to be bought out. Unlike T-Mobile, Sprint has MONEY to build like mad. T-Mobile, well, we’ll see…

    • TechHog

      The only reason they “don’t have the money” is due to Douche Telecom not wanting to invest anything while Softbank is willing to invest in Sprint. DT wants to have their cake and eat it too. They don’t need to be bought out, but they have to be since DT doesn’t want to support their brand yet they still want to be super picky about who they sell to. It’s sad. Their greed is going to result in T-Mobile going bankrupt and the US mobile industry reverting back to 2011.

      • Cayden Griesbach

        It’s not exactly greed. It’s just smart business. I don’t blame DT for wanting the best price when they finally sell the US market.

        • Romdude

          True but they are doing horribly in their own market, they have very little growth. I don’t know what they are thinking. Even if they sell tmobile for a good profit, then what? Keep on slowly going down the drain with a little bit more cash in the pocket?

        • Cayden Griesbach

          Use the 30+ billion to invest in their home market or but a company in Europe and expand. Also pay of any debt.

    • UMA_Fan

      Tmobile US is its own company now. How do you think most of these companies make spectrum purchases and such? Out of pocket??? No. They borrow from banks which tmobile is in a much better position than Sprint on its own to do.

      • Yep

        There’s also the option to sell shares, which (as a publicly traded company) is easy for T-Mobile USA to do.

    • RiskyBidThis

      Sprint only has money if Softbank chooses to directly subsidize them, which they haven’t so far. Barring that they have more debt, negative profits, worse cash flow, and a post-paid subscriber situation which can be most charitably described as potential turning things around after years of dire losses.

      T-Mobile has less debt, profits, positive cash flow, and a post-paid subscriber base growing like crazy based primarily on phone (not tablet) additions. I know which company I’d rather be right now and it isn’t Sprint.

      • Ginger917

        DT rolled 12 billion of their debt into the metro/tmobile merger. The new publicly traded company took on 12 BILLION of debt from DT, care to revise your statement?

        • Duhhhhh

          Why would he/she “revise the statement,” when it’s accurate? $12 billion in debt for T-Mobile USA is far lower than Sprint’s $32.2 billion in debt (as of September 2014).

        • RiskyBidThis

          Which part of it? DT issued 12 billion in loans to TMUS which were at a higher interest rate than much of their existing debt.

          I certainly wouldn’t call that assistance, but it also doesn’t change the fact that Sprint has more debt than TMUS, or that their growth trajectories aren’t even in the same layer of atmosphere.

    • socalrailroader

      Unimportant to who, you? You must live in some cube in Manhattan.

      • Mr Paul

        Yes, the best strategy for covering a country like the US is to disregard the biggest metro areas. T-Mobile is the ONLY carrier who covers the biggest metro areas so poorly and continually chooses to do so. Everyone whines about what duoplists AT&T and Verizon are, but they were intelligent enough to grasp the simple concept that to get the money and customers, you cover where the most money and customers bloody ARE. Duh! Even Sprint’s lame LTE footprint is still extents out to the important areas.

        • Aaron Davis

          Which “biggest metro areas” is T-Mobile disregarding?

          The Minneapolis/St. Paul area (not the biggest, but still quite large) is very well covered with LTE with a speed of 10 Mbit minimum, an average of 30Mbit, and in many places up to 70 Mbit (all the LTE towers will give that speed, you just have to be within a mile or so of the tower)

          I have even gotten speeds as high as 90Mbit in a few spots (one of those spots was on a roof only 5 feet from a tower antenna, so that’s not typical).

          Even in a fairly remote area (few minutes north of Big Lake MN, which is an hour northwest of Minneapolis) you can still get a perfectly usable 7 Mbit HSPA signal (in an area that sensorly shows as 2g-only) despite only having 1 bar of signal.

        • Mr Paul

          I’ve stated that MN is one of T-Mobile’s special exceptions. Their worst market in RootMetrics last quarter was the suburbs and commuter towns of NYC, the biggest metro area in the United States. Nothing rural or not important about them. T-Mobile should prioritize NYC, like LA, Texas Triangle, Research Triangle, NC, SoCal, NoCal, which are far more significant and profitable markets than MN, WI, or other grate lakes states.

          http://en.wikipedia.org/wiki/New_York_metropolitan_area

          Population (2013)
          23,484,225
          Under half coverage. Coverage in only NYC and it’s direct suburbs, meaning around only 9-10 out of nearly 23.5 million.

          http://en.wikipedia.org/wiki/Minneapolis%E2%80%93Saint_Paul

          Population (2013)
          3,797,883
          Virtually full coverage.

          Tell me, which offers T-Mobile more money?

          T-Mobile has covered enough Minneapolis-St-Pauls to finish the NYC metro area twice. And even though the tri-state is my primary example, it is only the worst of their dumb mistakes in where they prioritize their building and converting efforts. They don’t know how to make money, and they wonder why DT wants to sell them off.

          T-Mobile’s priorities are in the gutter. AT&T, Verizon and even Sprint never gave great lakes states coverage before the biggest metro areas. I wonder why? Less importance, less money. It comes later.

    • TylerCameron

      If Sprint has the money to build like mad, why haven’t they?…

      • Mr Paul

        They have. Look at RootMetrics testing for the last quarter. Whether or not they keep it up will be proven this year.

        • TylerCameron

          Even in areas where Sprint LTE exists, it doesn’t matter. Their LTE isn’t even as fast as 3G in a lot of areas. It barely reachest 7mbps if you’re lucky.

        • Mr Paul

          That’s PCS on low bandwidth, so yes, it sucks. Spark is what matters and they have been deploying that in many cities. In most areas, Verizon’s LTE is also not as fast as their 3G like mine…

  • tidus1ph

    After T-Mo messed up in the past when they aimed towards the youth when the adults are the one who has the money in the prior merger era, pathetic phone line up (better now but still behind the big 2), & when their marketing department raised the white flag during the merger phase with AT&T, it’ll take years for the company to become a wrecking force.

    It’s already a feat Legere turned it around in a very short amount of time when the company got the Iphone (not a fan but I admit customers moved away when they didn’t have it), Metropcs, better plans than the big 2, gathering good spectrum, farming 1900 and launching LTE faster in areas.

    Things doesn’t happen overnight. Now that the company is gaining momentum and gaining a dent in the industry, I say have patience and wait for a bit longer and give it a chance.

  • With a major investor like that, who trashes the current executive team and questions the feasibility of its business model in public, who needs competitors?

    If I were a member of the board of Deutsche Telekom, I’d ask for Hoettges’ for effectively publicly downgrading one of my subsidiaries and, consequently, the whole holding.

    • UMA_Fan

      I completely agree. The comments are against his own self interest. Also the comments could be blown out of proportion by the press. Saying he’s disappointed he couldn’t combine tmobile with sprint is far from saying I want to dump tmobile us off with the highest bidder. In reality he’s had plenty of opportunities to do just that.

    • Juan

      He’s only speaking the truth. Unlike you he actually has data to dictate from. You believe that a $30 prepaid makes TMobile money but in actuality they break even off you not by money but because you add to TMobile subscriber count.

  • Aurizen

    So T-Mobile is doing fine? thats good to hear they don’t need to get bought out.

  • MergerTime

    What T-Mobile needs is a merger with Dish. That is the answer. This is why DT is trying to drive up T-Mobile stock for the best possible price. JL said it once, “it’s a scale game”. This is how ATT and Verizon are in triple digits in customer base and coverage.

    • KlausWillSeeYouNow

      Yes. We need it, and need it now. I’ve been saying this for a long time… as the profile implies. Spectrum, cash, customers. Win-win.

      • socalrailroader

        The company with some of the worst customer service and rated the worst company in the US to work for? No, we don’t need that.

        • KlausWillSeeYouNow

          Seriously… Who gives a damn about that Glassdoor survey. And ACSI puts Dish at #1 in support – so I’m not sure what you’re talking about.

      • scottle

        Time to start getting a Magenta Kangaroo logo/mascot thing ready for the campaign :)

        • PB

          That kangaroo is the creepiest thing ever! Where’s Carly?

  • SprintSucks

    I am so glad the FCC put a stop to a Sprint/T-mobile merger. The management at Sprint is out of control, stock price could go bankrupt, Sprint has the worst customer satisfaction in the telcom business, if you put Sprint and T-Mobile together on a coverage map, they both overlap each other on coverage which wouldn’t expand anything. Sprint trolls need a reality check and need to get the F out and buy your RadioShack stores!

    • Pete

      FCC didn’t stop the merger. DT screwed negotiations up. Legere was going to run the joint company and Sprint had the cash infusion TMo needed. Also the spectrums and bands for both TMo and Sprint are completely different. The merger would have been good for both customers. I’d read up on what really happened. And yes, sprint still sucks. No disagreement there.

      • SprintSucks

        I agree, to clarify the FCC set rules and restrictions with regards to spectrum purchases and the quantity a company can hold. In other words, the FCC made Softbank fold on the pronounced JL leadership merger.

      • gmo8492

        I thought that Softbank couldn’t come up with a good enough story to convince the FCC to let them merge.

      • PB

        Not sure what you’re reading but Sprint has a ton of debt that Tmo did not assume. Seems a good thing for Tmo that the deal didn’t go through.

  • SprintSucks

    Softbank was trying to make a case with a T-Mobile merger more jobs would be created. Really? How many Sprint workers went to the unemployment line since Softbank took over? All you T-Mobile fans should praise the FCC.

    • IceMan

      You’re funny. T-Mobile cut around 4,200 jobs in 2013.

  • angcurry

    He’ll no T Mobile doesn’t need another buyer to survive. DT needs to chill out T. Mobile will profit they need to make there network strong and they are doing it . John and his team will and are doing it . DT needs to quit trying to sell it makes the company look weak. Let your CEO keep doing his job and you will see T Mobile will profit. T Mobile never looked so good and DT should be proud!!

  • JayQ330

    I think DT said it was “one of the best marketing stories it’s ever seen” because it might of been, but it’s not the best marketing for profit imo. Also I would have like a merger between 3&4 & keep in mind that the profit that the merged companies would of made would have easily taken customers from Verizon & at&t, so there “IMO” wouldn’t of been job cuts off that size. They would of easily moved Verizon & at&t up a notch & take no.1.

    • Daniel

      would of = would’ve. I know they sound the same, but would of is wrong. I usually don’t correct people, but you used would of instead of would’ve too many times.

  • Mike

    TMO has made a great comeback! The challenges it faces now are to maintain its current customer base, focus on cleaning up its network and growing its business. DT could help by giving up on the plan to sell off TMO. Like all businesses investment is needed to build out infrastructure to make the company stronger. Unfortunately, DT needs lots of cash to buildout its infrastructure in Europe and sees TMO as the source of that cash.

  • gmo8492

    Legere never gave a crap about the Germans back at DT to begin with. He just tends to brush them off as long as he gets to manage T-mobile the way he wants to.

  • SprintSucks

    Softbank should have bought T-Mobile instead of Sprint. Then Sprint would have gone through bankruptcy and have been put out of there worthless service. We would not be talking about mergers or any drama if this would have happened.

    • IceMan

      Man, talk about a biased a comment.

      • Romdude

        Maybe he’s like me where Sprint’s service was so abysmal for his area that he prefers tmobile. In my area, Sensorly and rootmetrics maps prove that Sprint is really bad and I have personally tried their service. Unlike him, I don’t hate Sprint, just indifferent given they have not shown my area any love.

    • Michael Carannante

      I totally agree, they should’ve bought T-Mobile.

      • Rob H.

        There is always Vodafone. LOL

        But seriously DT does not seem to care that T-Mobile is rebounding very well. As long as they can sell T-Mobile to the highest bidder with no regard for regulatory approval.

        • Romdude

          Yeah, anyone but DT right now is better never mind that their own business in Europe isn’t doing too well. I wonder after all this negativity from DT and tmobile is able to secure some decent spectrum, will they actually fully invest in tmobile? Maybe this was their plan all along or they are just a bunch of idiots.

    • vrm

      why ? they would whine and b1tch about investing in t-mobile also. Son/softbank never put their own money in sprint.

  • steve849

    Legere’s persona . . . it’s an act, right?

  • macarelli00

    After the low band auction, TMO should make law away payments to DT. Every year buy back some of DT Shares. Over 5-10 years they can buy DT out. lol

    • Aaron Davis

      For a corporation to make such a major move, there would be a shareholder vote. DT owns controlling votes. DT could just as easily vote to make T-mobile give DT that money for free (by voting to transfer all profits into stock dividends).

      It’s like the right hand trying to buy it’s freedom from the brain.

  • conservative_motorcyclist

    If DT had invested in the infrastructure of T-Mobile US back when they first acquired them, instead of bleeding them dry, this would be a much different story….
    So yes…they are operating at a loss right now, but because they have had to invest so much in playing catchup! Once the infrastructure is up and running they will be able to scale back their infrastructure investments and become more sustainable.

    • Rick Rudge

      I have to agree. T-Mobile was so far behind in the technology and spectrum. They did the right thing, and, instead of pocketing their profits, they re-invested in upgrading to faster towers; and this move has been slowly paying off for the company. Maybe if I lived out in the country, I might feel different, but where I live, T-Mobile’s signal is always strong. The mobile phone market is so big that a third or fourth class company is still going to be massively profitable. Keep up the good work, T-Mobile.

    • vrm

      I think that with the n/w and coverage improvements, the subscriber growth will only gather more momentum this year and next.

  • Angel Heart

    T-MOBILE will be on top..you just wait and see. i have my trust in them and JOHN

    • Bori

      Good for you.

    • Oh My

      I know the tooth fairies are going to come out of hiding and all join TMobile! I can’t wait!

  • Andrew Heisler

    tmobile and sprint should merge if they use the tmobile brand. And keep jonh in charge. Shut down the sprint network and use the spectrum. But sprint people would lose there jobs. There is only a few areas where sprint has coverage and t mobile dosent. But increased spectrum cant hurt. And if they have a company that can back them that would be good. I mean its not like sprint is really all competitive anyway. Just go shut them down.

    • Bori

      I’d say by T-mobile and keep the sprint name and Johnny

    • PB

      Sprint has too much debt. Don’t need to buy them as they are bleeding customers over to tmo at a more affordable rate.

  • tomarone

    I just bought my GTabS when I saw the $48.00 discount. I hope the T-Mo network works well enough for it! I sure appreciate it, though.
    Amazon seems to go on forever unprofitably, as does T-Mobile.
    One reason they do, is that they make scads of $$$ for the people who work and run those companies, if not for the shareholders themselves!

  • vrm

    Never understood why sprint ? If the gov steps back and allows mergers among top 4, wouldn’t at&t make another play for t-mobile ? And with phone compatibility and n/w compatibility, it would be a better fit.

    So, if there HAS to be a merger, why sprint ?

    • TylerCameron

      Because they have a lot of (useless) spectrum and their network can be converted to GSM with work.
      If AT&T bought T-Mobile, there’d be no more unlimited data. And who can use a phone without unlimited data? That’s the most important thing ever.

      • winner circle

        Verizon 102+ million customers …

    • ATT Loves TMO

      Yes, AT&T does seem to be infatuated in T-Mobile, copying a lot of moves T-Mo has been making.

  • MuthaFuckinStephen

    I’m not impress either. Adam Silver should be focusing on the NBA, not wireless.

    • Adam Silver

      What about Adam Silver?

  • Winski

    Legere just keeps swatting these pesky land-fill flies away like the pests they are.. Keep rocking John… We’re with you…

    • K M

      Yes, you have to be a true visionary to lose $4-$5 billion a year with no profit in sight. Legere’s smarts is better suited for government work.

  • Nathan

    Both. Depending on market penetration percentage.