Boost Mobile founder wants prepaid brand divested if T-Mobile and Sprint merge

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There’s sure to be plenty of back and forth about the merger of T-Mobile and Sprint in the coming months, with sides arguing for and against the deal. This week a former mobile CEO has weighed in.

Peter Adderton, founder and former CEO of Boost Mobile, has said that the T-Mobile and Sprint merger shouldn’t be allowed to happen unless Boost Mobile and/or MetroPCS are spun off. Adderton argues that with Boost, Virgin Mobile, and Metro, the new T-Mobile would hold a 40 percent prepaid market share, which he believes “has the effect of being a monopoly or extreme dominance in the category.”

A combined T-Mobile-Sprint would have incentive to restrict access to its networks for competing MVNOs, Adderton went on to say. He added that without wholesale pricing protections, the new T-Mobile could raise wholesale rates for MVNO competitors, limiting their opportunity for profit and possibly resulting in higher wholesale rates from AT&T and Verizon.

Adderton also argued that challenger brands like Boost Mobile and MetroPCS are aggressively competing for prepaid customers, but that that would go away if T-Mobile and Sprint combine. “This level of market domination virtually always leads to rising prices, more onerous terms and conditions and lower service quality,” said Adderton of the 40 percent prepaid market share that the combined T-Mobile would hold, “and young and credit-challenged prepaid subscribers simply can’t afford that.”

If the new T-Mobile ends up divesting Boost Mobile to get approval for its merger, Adderton says that he and a group of investors would make a bid for it. “As a founder of Boost it’s a passion of mine. It’s kind of like my baby,” he explained.

For now, Adderton plans to contact regulators and ask them to consider the effects that this T-Mobile-Sprint merger could have on prepaid customers. He also plans to lobby for formal regulation of wholesale pricing for MVNOs to ensure that prepaid operators can continue to compete.

Via: FierceWireless
Sources: Bloomberg, GlobeNewswire

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  • The Borg

    If this guy gets what he wants, then it’s okay. If not, than no way. What a cry baby!

    • Peter Adderton

      thank’s but in all honesty I want 30 million pre paid consumers to have two independent brands fighting for there business, under the merger I don’t think this will happen as Boost and Metro have been the two brands driving down prices…its one man’s opinion.:)

  • squiggleslash

    Doesn’t make any sense. T-Mobile divesting itself of one of the prepaid operators still means it has the other, and would see the divested operator as being competition. If it divests itself of both, it still sells prepaid service directly under the T-Mobile banner. So… what’s the point?

    • SirStephenH

      The point, as the article said, is that T-Mobile wouldn’t own 40% of the MVNO/prepaid market.

  • (J²)

    These prepaid MNVO’s use to be separate and operated independently. T-Mobile and Sprint has spent the last 10 years acquiring these MNVO’s. Some of these carriers only ties were that they leased access to towers from a larger carrier.

    The former Boost CEO is basically suggesting that this should be undo and each prepaid brand operate separately. That would mean they are in control of their own plans and pricing but would still ultimately report under T-Mobile’s subscriber count.

    The issue is (well for T-Mobile) this would allow smaller prepaid brands to directly with T-Mobile. Boost and Virgin Mobile have always been an “alternative” to Sprint and had no issues competing with the larger carrier.

  • StevenM

    Well good for him… It’s up to the regulators.

  • Chimphappyhour

    “It’s my baby” That I sold off to someone else.

  • PC_Tool

    I used Boost for a short period early on. Frankly, I am surprised anyone involved in the early stages of the company would care to admit to it – much lees look back on it fondly.

  • Derek

    Why does everyone assume that if you have a prepaid phone, you have bad credit? My credit score is verging on the 800 range and i use prepaid. The cost is more affordable and unlike other people who use post-paid service for “financing a phone”, i generally just use cash and buy my phone outright. It’s a$$ backwards in my mind.

    • (J²)

      Because the majority of people who use prepaid are using it due to it’s low cost, cheap phones and the flexibility of not actually having to maintain service or pay your bill on time. By no means does that represent all users but it does the vary majority.

      Also, carriers like Boost Mobile will allow you to receive calls when service is interrupted.

    • Timi Mafua

      That USED to be the thinking, but then the economy took a down turn. After that, alot of people were looking for ways to control costs or at least have predictable costs. That’s when the prepaid attitude sort of changed. That’s also when the prepaid plans that were offered changed – to address the new type of customer. There still could be some legacy stereotype, but anyone that works in or around the business knows we are in a different place now. It’s a payment option, not a necessarily a reflection of credit.

  • Mike McDonald

    I saw him on CNBC. He was asked if he regretted selling to Sprint. He fudged answering the question directly but it seemed he had major regrets. This is just sour grapes on his part and shows he doesn’t have the capital to buy it back at market.

    • Peter Adderton

      Mike, I don’t recall being asked that question on CNBC , but I assure you if Boost got spun out and sold to someone other than me that would be a great outcome for consumer’s, but as for me having the capital to buy it back if they agreed I guess that would be answered at the time I needed to wire the funds .:)

    • jen snow

      I don’t care what his motivations are in this case. He makes a legitimate and accurate point. This affects consumer choice and our monthly expenses; stop trying to deflect by making this about one rich guy. Not my problem.

  • Andy_Naija

    I think a good idea would be for T-Mobile/Sprint to spin off Boost and
    Virgin Mobile and also give them their own network to operate on.

    From what people have been saying, the combined Sprint and T-Mobile
    would hold too much spectrum, so it would make sense to give away some
    excess spectrum and allow Boost to operate on their own. Also on the
    plus side it’ll make transitioning customers a little easier since there
    will be a few less customers to worry about.

    • (J²)

      That would defeat the purpose of this merger almost entirely. The MNVO’s – Boost Mobile and Virgin Mobile should just be sold off and independently run and simply remain “powered by “x” carrier” the way it was a decade ago. The issue is a lot of the legacy prepaid brands have been snatched up by the Big 4 and incorporated into their brand. That needs to be undone, entirely.

      They do not need their own network, they can just go back to leasing access. If the combined company were forced to split assets with another entity, there would be absolutely nothing to gain from this merger.

      It’s already likely, new T-Mobile would have to sell spectrum in markets where it has too much.

    • SirStephenH

      Half of spectrum of the combined company would be band 41 (2.5GHz). Their mid and low-band holdings together would be almost identical to AT&T’s. Band 41 isn’t that useful to an LTE network so in order to spin-off a network with its own spectrum T-Mobile would have to give up too much of its spectrum necessary to compete on the same level as AT&T and Verizon.
      AT&T and Verizon are planning on spending big in future high-band and mm auctions while T-Mobile won’t if this merger goes through because they’ll already have a good chunk of spectrum. This will equalize the spectrum holdings.

      Then there’s the towers. How are they going to spin off enough towers in the right places to create a whole nother network when they are necessary to maintain T-Mobile’s?

      Then there’s costs. MVNOs are able to provide low cost plans because they don’t maintain their own network, instead they purchase capacity from other networks. Having them maintain their own network would be the equivalent of creating another Sprint.

      Then there’s the question of what would be the point in merging to better compete with AT&T and Verizon when you’re just going to have to turn around and give up a large chunk of the combined company.

      Spinning off spectrum and towers to create another network makes ZERO sense. They could spin-off the MVNOs and have them operate as normal MVNOs by having them purchase capacity though.

  • SirStephenH

    Adderton just regrets selling Boost to Sprint and is using this as a chance to get it back at below cost. Cry me a river.

    I do believe that the MVNOs should be spun-off or combined into T-Mobile’s prepaid brand though. There’s no reason for them to have a half a dozen brands under their roof.

    • Acdc1a

      It’s the illusion of competition.

    • Peter Adderton

      Actually I sold it to nextel Not sprint who was the majority share holder of Boost at the time as it was a JV , and as the founder I have been extremely pleased by the success Boost has had here in the USA, my concern is not if I get it back, its been 16 years since I owned it, this is about ensuring the brand survives the merger which it wont if there not forced to spin it out, But I can see your Point, I just hope this better explains my intentions.

  • zeiferx

    The merger is good for business…. not good for customers.
    a lot of you have gotten lost in the propaganda of the uncarrier that Jhon has been selling in his Kool-aid and have completely lose track of what it was.
    tmobile “uncarrier” move was nothing else than a “our network sucks but we have all this great freebies” campaign that was needed to stay alive while they use the money they got from att when the previous merger didn’t go thru. there network evolved and became strong while at the same time freebies where not as good anymore, do you remember when was the last uncarrier or what it gave you ? do you remember how often they used to happen in the beginning ? freebies are still coming but not as they were in the beginning.
    I say this because you have forgotten that all of that ,plus the necessity to add customers was really what made the other carriers move away from so many plans and restrictions that were not good for us the customer.
    Tmobile didn’t do any of it for you, they are not the “good guy” Tmobile did it all to survive, grow and compete. if tmobile didn’t needed to do all of that to compete we would all still be on those 2.5gb plans and so on.
    been with tmobile since the 04 so save your saliva saying im a hater and all of that.
    dont lose perspective, the less competition you get among the carriers the worst its for you as a customer. the moment they dont have anyone pressuring them is the moment they get comfortable and forget about customers.

  • turtle6988

    I think Boost customers would be absorbed by MetroPCS while obviously Sprint would be absorbed by T-mobile

  • Boost, virgin, and MetroPCS should merge and create some type of mega prepaid carrier. Of course they would have to switch over to GSM to stay competitive something that MetroPCS and TMobile already are