For the past four years, analysts like us have continuously discussed who might merge with or take over T-Mobile US. But the tone has always been one of the management team at say Comcast or Sprint taking over. Listening to the discussion around T-Mobile’s results this week, the tone was very much one of John Legere, helping a pay TV company become an “uncarrier” business during 2017.
Faultline made a stand in 2011 saying that a merger with AT&T would not pass muster at regulators and that forecast turned out to be true. But since then all of us have talked about T-Mobile in the same voice, that it is fundamentally broken and too small to compete with AT&T and Verizon. The truth is far from that and after 3 years of adding 8 million or more subscribers to its cellular operation, it is clear that many investors would rather see Legere running a merged entity, and that T-Mobile US may become the aggressor in a pay TV acquisition, not the prey.
In its results conference this week, pay TV was only mentioned half a dozen times, but in every case, it was to belittle what AT&T has done with DirecTV so far, to point out clear trends that TV is moving to the internet and becoming less linear, and that the internet is moving to phones – so why the hell not join in?
Legere said, “…whether or not the cable and the pay-TV and the box industry is ripe for Uncarriering. And we’d have to change it from carrier, but talk about a poster child for an industry that has really kind of ignored customers and ignored customer cares and gouged at every quarter.” By gouging he means increased prices regardless of appeal, driving up ARPU until customers are furious.
“I salivate when I think about the possibilities of changing some of those industries. And frankly, I’m fascinated with how little AT&T has done since they spent the mother load buying DirecTV, and pretty much have let it sit on the side, and still be an old crappy linear TV that they bundle weekly with their unlimited offer.”
At this point, COO Michael Sievert piped in with, “Yeah. The data on this is really clear. The cable industry is statistically one of the most unloved industries in the history of the consumer economy. So, obviously, it’s ripe for innovation in this area… In 2017 we will reach the point where people have more screen time on mobile devices than on any other kind of screen, and that’s really something incredible when it comes to watching their video.”
So it the tail is now wagging the dog, this is finally perhaps a US MNO that understands what Mobile TV First actually means, whereby a cellular operator uses its grip on a highly-personalized service, to own the TV relationship. Watch this space.