T-Mobile CEO Insists New Merger Will Create Jobs, Competition. Wall Street, History Disagree.

from the merge-ALL-the-things dept

Historically, large telecom mergers don’t end well for consumers or employees. Usually in the wake of these megadeals nothing much happens for about a year, after which the acquiring company begins trimming back redundant positions and offices. In telecom, growth for growth’s sake also usually has a detrimental impact on customer service, investment in which takes a back seat to getting acquired systems and employees in sync (see: Comcast). And more often than not, mindless consolidation in telecom tends to slowly reduce overall players in the space, resulting in higher prices and apathy no matter how many promises to the contrary are made by the merging companies (see: Charter, Time Warner Cable).

As T-Mobile and Sprint attempt to merge (once again), their executives are throwing out all the usual claims ahead of such mergers: that the merger will create immeasurable “synergies”; that the reduction of major U.S. wireless competitors from four to three will somehow create competition; that the deal will somehow make it easier for them to deploy next-gen “5G” networks; and that the deal will somehow magically create oodles of new jobs.

At a meeting with Sprint employees this week, T-Mobile CEO John Legere tried to ease employees’ worries that many of them would be out of a job once the two carriers are fused into one. This merger, Legere told employees, would somehow be different (he failed to offer any solid reasons why):

“Synergies? is a scary word for people,? acknowledged T-Mobile?s Legere in comments to Sprint employees during Sprint?s town hall meeting with T-Mobile?s management. ?In general, in mergers and in things that are done that are just about survival, synergy usually means people losing jobs, supply going down. This is a very, very unique merger. And as Marcelo [Claure, Sprint?s former CEO] said, when you raise that little right hand and swear to tell the truth, the whole truth, and nothing but the truth, when you say we?re going to add jobs, we?re going to add jobs.”

It’s worth bookmarking that claim for posterity. Especially since this is the exact opposite of what most Wall Street analysts are saying. Analysts are predicting anywhere between 10,000 and 30,000 potential jobs lost (the latter being nearly as many employees as Sprint has) as the new, bigger T-Mobile sets about eliminating redundant positions, especially in retail. But Legere, undaundted, didn’t just stop there, insisting that the job creation from the merger could be even more spectacular for some, unspecified reason:

“We?ve said it from day one: There will be more jobs on day one and every day thereafter than both companies. And by the way, that?s assuming that both companies are successful with the plans that they had laid out. Right? So it could be even more than what would ultimately happen,? he said.

Continued Legere: ?Two is those come in different varieties, but year one, you can expect 3,000 more jobs. Right? By 2024, 11, 000 more jobs. We need at least 5,000 new Care positions. We?re going to build new retail stores. Okay? A lot of network investment in jobs. New businesses that we?re entering into that we don?t have the talent or capability from.”

Legere’s likely going to get a pass for this because, in stark contrast to most telecom CEOs, he’s “brash” and funny. But that doesn’t really change the historical precedent that, as anybody who has watched or lived through a telecom merger can attest, a sizable erosion of jobs is simply part of the equation. Again, for about a year after most deals you’ll hear near-endless assurances that “nothing is going to change,” until, of course, it does.

Mega Deals are usually fantastic for both shareholders and executives, in part because they quite often reduce competition, therefore increasing market power and reducing any incentive to oh, try. But megamergers are almost always harmful for consumers, yet every time one comes up the press coverage just kind of floats over that fact, with “he said, she said” reporting never really pointing out the lessons of history. That’s especially true in telecom, where the downsides of a relentless, almost mindless urge to consolidate are abundantly obvious, but always play second fiddle to CEO promises that this time will be different.

The companies’ previous merger attempt was blocked in 2014 after regulators noted that removing one of just four major carriers would result in a proportionally-lower incentive to actually compete on price, something that’s really not debatable if you’ve paid attention to telecom and broadband industry history. That’s especially true in Canada, where consolidation to just three players has resulted in some of the highest mobile data prices in the developed world. AT&T’s attempt to acquire T-Mobile in 2011 was blocked for the same reason, a move many forget resulted in T-Mobile being more competitive than ever.

Whether this effort gets approved still isn’t clear, though the Ajit Pai FCC’s tendency to rubber stamp most industry desires isn’t boding well for opponents of the $23 billion super-union. It’s not really clear why American consumers and the press, time and time again, blindly believe promises of merger synergies like some perpetual game of Charlie Brown and Lucy playing “football.” But what is clear is that this gullibility isn’t something that’s going away any time soon.

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Companies: sprint, t-mobile

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Comments on “T-Mobile CEO Insists New Merger Will Create Jobs, Competition. Wall Street, History Disagree.”

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Anonymous Coward says:

Re: Re:

At a meeting with Sprint employees this week, T-Mobile CEO John Legere tried to ease employees’ worries that many of them would be out of a job once the two carriers are fused into one.

This is clearly bullshit. Every CEO attempts the same thing in an effort to avoid a mass exodus before the C level can decide who to can. Sadly, it works most of the time and the employees loyally work right up to the day they’re laid off, saving the company lots of headaches trying to keep the machinery running in the interim.

If I’m ever in this situation again I’ll leave immediately. Sprint and T-Mobile employees should do the same.

Anonymous Coward says:

Re: Re: Re:

Why would there be a “mass exodus”, and why wouldn’t the “c-level” want that? Mass layoffs involve lots of red tape. People who leave voluntarily don’t get severence or unemployment benefits. It’s not believable the company would see an exodus so mass to put it in jeopardy; many employees would have financial difficulties with that.

James Burkhardt (profile) says:

Re: Re: Re: Re:

The issue is a merger is still a ways off, but if employees get spooked they might loose significant numbers to employees searching for new jobs. Not just quitting – that would be hard on the employees, but hemorrhaging employees to other jobs before the merger is even final. And if the merger falls through, they still lose all those employees, which might not have been an issue for the combined company, but could be a huge one for the 2 companies, post failed merger. And one of the reasons not much happens in the first 6 months – 1 year is that the companies still have separate systems and processes, and until they are integrated you need both teams working at the pre-merger capacity.

There are a lot of variables, but in the end large departures before the merger is official, or final, or before the two companies are integrated, can play hell on the company. And these departures happen over time because of the long time such a merger takes. Months between a deal being struck and regulatory approval/denial is plenty of time for employees in the back offices to find other work. Heck in the current job market, the retail workers will likely have good mobility as well.

Anonymous Coward says:

Re: Re: Re:

The jig is up.

People refuse to take responsibility and instead endlessly beg for others to take care of them now and to make all the hard decisions. When it is all said and done the only difficult choices they want to make are fries or tater tots.

Everyone is looking for Government to become their new Savior/God/Religion or whatever since they all feel abandoned by the lies of the many religions being peddled by shysters and false prophets.

The moment a politician promises to do something for you if you vote for them is the moment you know they are evil. And yet, people just cannot get enough of it.

No one wants to take responsibility for where they choose to work, or who they do business with. They just want a politician to solve the problem so they don’t have to put any skin in the game. The problem is that they never realize that the ONLY skin in the game at all is theirs. Which is why I never feel sorry for the fleeced… they asked for it!

Chip says:

Re: Re: Re: Re:

I am very Smart.

You can “tell that I am Very SMART because I use a lot of Words. Some of those “words” are Big.

Many of those “words” are Cliches. Like “the jig is up” and “when it is all said and done” and “skin ti the Game”. Some of the words I use are Quotes from Historical “figures”. That is how I know I am Smart: because I say Things that “other People” already Said. I have Lots and Lots of original Ideas! That is “why” I say the Same “things” over and Over Again, because I am Smart!

Also, “The Definition aof Stupidity is Doing the same thing “over and Over again” and expecting different Results!” – Albert Einstein

Now you may say “Chip, Albert Einstein never actually “said” That, that is just something you “saw” on the INTERNET.” That is because you are a sycophantic “loser” who does not understand how “smart” I am.

Sometimes I use Capital LETTERS. and quotation Marks! And exclamation “marks”. That is how you can Tell that I am Smart.

Also I make lots and Lots of “bold Genralizations”. Like all Politicains are Bad! and all regulations are BAD! and everybody is Stupid! except for Me! Why are you sto Stupid! Stupid! Not “smart”. Not Smart like I am Smart! So very, very Smart.

Every Nation eats the Paint chips it Deserves!

Anonymous Coward says:

Re: Re: Re:2 Re:

As long as you are stupid and weak, you are gamed like a stupid and weak person.

Stupid and weak people rely on government to protect them from everything. Why are you shocked when you get taken advantage of by a business that buys your protection and then takes advantage of that protection themselves?

You are being sold out by the very politicians that you vote in to rule over you. If you keep doing the same thing over and over again but expect different results each time then yea… that does make me the smart one for noticing that and the rest that do not… stupid.

Anonymous Coward says:

Re: Re: Re:2 Re:

I do take personal responsibility and have plenty of real world experience as a high school dropout from a poor family with no college experience earning a six figure salary.

Unlike you, I refuse to see myself as a pitiful loser victim that needs to be saved by government politicians trying to control big mean nasty businesses because I am too lazy or weak to go without something to stand by my principles.

The smoke around here comes from the masses of clueless losers looking to politicians to save them while they watch as the same sell them out.

Who is the fool? Those who do for themselves, or those whining for others to do it for them?

Anonymous Coward says:

Simple answer. get t-mobile to sign a LEGAL BINDING agreement with every single customer that it will give them WITHOUT DELAY $500,000 EACH if their bills go up anytime within the next 5 years due to merger.

Then because it’s signed directly with the customers as a binding contract, t-mobile would be wiped from existence by lawsuits if it lied.

That One Guy (profile) says:

Re: 'Now, are you willing to put that down in writing...?'

Indeed, it would be all too easy to call his bluff by simply asking if he’d be willing to sign a legally binding document that what he’s telling is the truth.

Prices will go down, not up? Great, then he has nothing to fear by signing a legally binding promise that if they don’t the resulting company will be hit with significant fines.

Jobs will not be lost, they will in fact increase? Alrighty then, should no issue at all signing a legally binding document stating that the company will be paying the bills for anyone laid off while they look for another job, for as long as it takes them to get one, rather than the government being on the hook for that.

I suspect that if lying carried an actual penalty he’d be much more restrained in making wild claims like he’s currently doing.

Anonymous Coward says:

Re: Re:

Then because it’s signed directly with the customers as a binding contract, t-mobile would be wiped from existence by lawsuits if it lied.

Wouldn’t help. Telcos have ignored legal obligations for years. And anyway, t-mobile could wipe themselves from existence to get out of it: create a sham company, transfer all assets and personnel over, and then people can sue the empty husk all they want.

Anonymous Coward says:

Re: merger synergy

what is the basic purpose of a “merger” of any two businesses any where in the world ? why bother merging?

Are business mergers always bad … or is it just that U.S. telecom mergers are always bad ?

How do economists objectively determine if a specific merger is good or bad ?

Anonymous Anonymous Coward (profile) says:

Re: Re: merger synergy

"what is the basic purpose of a "merger" of any two businesses any where in the world ? why bother merging?"

It has to do with investors (often just refereed to as Wall Street here in the US) and their possibly unreasonable desire for continued growth. Once a company has milked their market for all or most of the growth they can wring out, growth slows down, investors complain. Then they can either merge with a direct competitor or purchase some company in a different line and hope that the ‘fit’ won’t bring them both down.

Anonymous Anonymous Coward (profile) says:

Re: Re: Re:2 merger synergy

Think about it. When there is only one corporation left, because they merged/bought all the others, where does the growth come from?

My point is that constant growth forever is unsustainable, though it might take a while to actually get there. Think about all the harms that might be done with this process.

We haven’t found a way to curb their insatiable appetites. In the mean time, even government rules are ignored and the mergers continue, which has to do more with political systems rather than business, though the business system of regulatory capture seems to be working well.

Anonymous Coward says:

Re: Re: Re:4 merger synergy

Another person that does not get it.

The problem is not capitalism, or socialism, or communism or any other ism you can crap up.

The problem is just humans. No matter which system you put into place a boot will be on the back of you neck because you are too stupid to avoid it.

The problem has always been humans, but it still does not stop folks like you from getting off on blaming ideas for problems like a moron.

Anonymous Coward says:

Re: Re: Re:5 merger synergy

The present economic system in the us is called capitalism by most who are knowledgeable in the field.

Humans screw everything up and therefore the economic system is screwed up – ok. … no matter which one you use …. Ok.

But do not criticize the system, ohhh – nooooo you stupid moron, you need to blame it upon humans.

Now don’t you feel better?

OA (profile) says:

Re: Re: Re:5 merger synergy

This is not exactly correct.

The problem is not capitalism, or socialism, or communism or any other ism you can crap up.

The problem is just humans.

You are misusing this concept. [Ironically, today, I wrote a long comment under a different post that mentions ‘isms’ explicitly. I probably won’t submit it though…]

Please let me explain.

Improper or unnecessary ‘isms’ are a significant part of the problem. They can encapsulate bad ideas, exaggerations, manipulations, half truths, etc… They can trigger tribalism and make use of the improper labeling of ideas. They are also excellent at promoting dehumanization. Some people exposed to ‘isms’ believe they understand the world. Bad ‘isms’ can turn the ideas of a fool into autonomous, unstoppable social movements. Perhaps the worst part, fake ‘isms’ displace real ‘isms’…

The statement, ‘The problem is just humans’, IN THIS CONTEXT, is carelessly vague and improper.

Improper ‘Isms’ can take bad human tendencies and unnaturally give them the force of wisdom or knowledge.

The problem is not about the smoke, intense heat or 3rd degree burns. The problem is just fire.

Anonymous Coward says:

Re: Re: merger synergy

Mergers happen for specific reasons (check all that apply):

  • To enter a new market without having to build the business yourself
  • To gain potential new customers for your existing business
  • To eliminate competition

In all cases there are synergies, ahem, I mean redundancies across the board, all jobs that will be eliminated. The net result is always less than the sum of its parts.

Often the merger (as opposed to the mergee) has no idea how to run their new business and end up running it into the ground thus killing off even more jobs. And the culteral differences between the two companies will result in even more heartache.

Mergers are almost never a good thing.

Rinse & Repeat says:

Re: Re: Re: merger synergy

.. and then the C-Suite geniuses say they are breaking up the company in order to focus on management, maximize shareholder value, and other such nonsense – many employees will be laid off.

Then they say the are merging in order to take advantage of synergies and many employees will be laid off.

Then they say ….

James Burkhardt (profile) says:

Re: Re: merger synergy

So, a ‘merger’ is at its core the purchasing (acquisition) of one company by another in which the separate companies integrate. Its a core component of modern capitalism. There are a number of reasons to do this, horizontal integration, vertical integration, elimination of a competitor, ect. But overall, the goal is more money and market share. Its easy to understand when you realize the game “Monopoly” is a great example of un-regulated capitalism. I will actually discuss acquisitions in more general terms here as well.

There are currently general legal standards that courts use to consider acquisitions, but they are narrow and don’t consider ways in which two related businesses can lock up the market (See the recent AT&T/Time Warner Acquistion legal disputes)

But more generally, regulators try to look at the effect on the market. Overall, US policy has settled on the idea that monopolies aren’t necessarily bad, that we can’t force consumers to choose a competitor. If a company’s product is cheaper and better, they will ‘win’. But if a company has too much market power, it will have a high likelyhood of manipulating the market to its own advantage.

Telecom has a bad history of this, harming consumers and the market to line its pockets, so we give them higher scrutiny. It is believed by regulators that allowing 2 of the top 4 wireless carriers to merge will result in even worse issues in the wireless sector with regards to pricing and customer service as the companies have less of a need to compete. That is before any concerns about how this will effect downstream carriers like Metro or Cricket.

Mergers will probably always produce fewer jobs on the other end. There are always duplicate executives, too many CS agents, Duplicate back office staff. But regulators largely aren’t concerned with that.

Mergers can be of market benefit – two smaller competitors in a market combining to challenge an entrenched competitor. But most are neutral at best. Traditionally these tend to happen when a competitor gobbles up the competition (WWE and WCW), or a dominant player acquires a new facet to their business. Thats why you hear bad things about mergers – the ones that make the news are often the biggest, most anti-competitive ones.

In the end, its not a hard and fast rule, its about looking at the details and trying to predict the market the merger creates.

That One Guy (profile) says:

Why stop there?

While he’s at it he should be talking about how the merger will also prevent people from stubbing their toes ever again, give everyone who can house them either a puppy or a kitten, and make their breakfast cereal of choice taste at least twice as good.

I mean if you’re going to make absurd claims with almost zero tie to reality might as well go all in.

Anonymous Anonymous Coward (profile) says:

Re: Re: It will...

Might I suggest that the number of competitors be higher than 3 or 4? It might help if we not only denied this merger, but break all the telecoms into 3 or 4 or 5 pieces (not regional, but directly competing with each other), and then not allow them to re-merge. Oh, and remove barriers to entry aggressively.

Anonymous Coward says:

Re: Re: Re: It will...

Might I suggest that the number of competitors be higher than 3 or 4?

You could, but it obscures our end goal: cheap, reliable, universal service. We keep deregulating things and hoping that competition will improve service, despite the evidence. Perhaps it’s time to try regulation again—at minimum give third-party ISPs wholesale access to local infrastructure, as is done elsewhere and used to be required for ADSL in America.

James Burkhardt (profile) says:

Re: Re: Re:2 It will...

>We keep deregulating things and hoping that competition will improve service, despite the evidence

>>Some political groups keep deregulating things claiming competition will improve service, despite the evidence


The market being discussed, wireless telecomunications, has issues competition can’t solve, and both its upstream industry, Wireless towers/backhaul and its limited resource, Electromagnetic Spectrum, are most efficiently served by a central monopoly. So I do agree to the broad strokes of your idea, though perhaps the details I will post to AAC’s comment may differ.

James Burkhardt (profile) says:

Re: Re: Re: It will...

The market being discussed, wireless telecommunications, can’t effectively be broken up except regionally without deeper changes, and even then its a logistical nightmare.

lets break the business sectors up first. There is the sale of wireless telecommunications services. Its what you think of as the business. Then there is the infrastructure business, the towers and back haul. And there is the limited resource both of them work with – spectrum. The infrastructure and spectrum management benefit from monopolistic control. So there is the immediate question of who gets it, if we keep managing infrastructure with the big 4, if we allow consolidation, ect.

To simplify things, we assign the spectrum to the infrastructure, and lease the use of the tower, and thereby the spectrum, to the wireless service provider. but we immediately see issues elsewhere. We are creating entire businesses people rely on out of nothing, with lots of new positions but lacking any understanding of the processes necessary. Comcast Xfinity Mobile for instance has encountered several issues in managing billing in the mobile environment that don’t appear in their main markets. Customer service agents clearly don’t understand these issues. (The one I can currently highlight is billing issues related to service that requires a back ordered device. They start billing immediately, even though service is not provided until the device is received). Separating the billing without issue will be screwed up. And as we saw with frontier, handing off service is not going to go easy. Heck, despite the ease thieves find in porting numbers, I have never had the process go smoothly.

But even assuming you can divvy up the institutional and back end knowledge, separate the billing systems, and hand over service with NO loss of service, you then still have to look at retail. In person customer service is a major advantage, but how do we divvy up the retail locations? Could a sly executive moneyball himself into getting the high value retail, and win by getting the prime sales locations? You are banning mergers, but those types of acquisitions are often used to close out a failed competitor. IF AT&T West SJ fails, one of the easiest ways for the bankruptcy court to pay off its debts is to sell the remaining business to a competitor. Are we banning this practice? It might depress the ability to get financing, which might hurt the introduction of further competition.

Anonymous Anonymous Coward (profile) says:

Re: Re: Re:2 It will...

You raise some good points. I agree it would be more difficult to share infrastructure and therefore spectrum between competing companies, mainly I think, because there are so many connection points (as apposed to fixed broadband where there is only one connection point, or location, per customer) I think those things could be worked out over time.

The issue with customer service is also something that would work itself out, if excellent customer service is not offered, then the customer goes to a competitor. Customer service would improve or they wind up losing all their customers.

The failed business is another issue. Bankruptcy or not, if one of the imagined 10 or 15 competitors fails to differentiate themselves and therefore loses sufficient market to make the business untenable then the choices would be to prop the business up artificially or let it go, and therefore, regardless, we lose a competitor. It is an important point.

I don’t know what the right number of competitors is. I do know that 4 hasn’t been enough, especially when they don’t actually collude, but play follow the leader (so to speak) and all wind up doing the same bullshit practices.

ECA (profile) says:

Logic Rules..

They do have a point..
But its 1 sided.
More jobs Where?? In T mobile..
LESS jobs in the other company..

And as said above..
You have seen, I have seen, you know, I know, everyone KNOWS whats going to happen.. we have watched this for YEARS, as one company/corp takes over another..

The biggest cut is interesting, as ALL the companies Ship this to a 2nd company..the bill collection.
It wont even be T-mobile that gets the Decrease in jobs. It will be a company that does the paperwork, the company that does Customer service.. which is only 1/2 the business.

The Physical jobs..Will need to be there..Repairs, and installation, and hardware monitoring.

skurfa (profile) says:

If this merger doesn’t go through then everyone at Sprint will lose their jobs because they cannot survive. I have been a Sprint customer for 19 years, I have 8 lines (business) The ONLY way I will not be fleeing to Verizon by the end of the year is if this goes through and Legere can make it work for customers. When people like me who have stuck with Sprint for this long and even been fanboys decide to leave? All hope is lost.

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