Rumors swirled around the telecom industry for weeks that T-Mobile would be buying the Ryan Reynolds led Mint Mobile. But the real shock came when T-Mobile announced it was not only acquiring Mint, but their largest MVNO in the dealer channel, Ultra Mobile (estimated 750,000 to 850,000 subscribers), and MVNO aggregator Plum as well. As always, the CEO of T-Mobile and others lauded this as great for the industry, competition, and combining synergies. But questions remain and it’s anyone’s guess if the Department of Justice will sue to block this sale.
Let’s revisit recent history. In April 2018, T-Mobile announced that it was going to “merge” with Sprint in a $26 billion deal. Both Sprint’s and T-Mobile’s former CEOs went before Congress promising, amongst other things, increased competition, lower prices, no store closings, the hiring of 100,000 new employees, and no reduction in the current workforce.
We all know what happened. Two years later in 2020 after many contentious arguments, challenges, testimony, etc., the deal closed and to no one’s surprise, Sprint doors were shuttered (both corporate-owned and dealer owned), and nowhere near 100,000 new jobs were created. In fact, according to Todd Bishop in his April 11, 2023 article in Geek Wire, the combined companies now have 9,000 FEWER employees than they did pre-merger. https://www.geekwire.com/2023/3-years-after-sprint-merger-t-mobile-employs-9k-fewer-people-insists-it-upheld-pledge-on-jobs/ (This article is a great read!).
T-Mobile Has Done a Tremendous Job in All Parts of Their Business, But….
Okay, let me be clear, I have the utmost respect for T-Mobile for knocking Verizon off of the lofty perch it enjoyed for many years. Subscribers, network, etc., you can’t argue that Mr. Sievert and his Team haven’t done an outstanding job in delivering what Wall Street wants.
But let’s go back to the issue at hand. The current landscape sees the three largest MVNOs owned by a carrier; Boost Mobile (by DISH), Cricket Wireless (by AT&T), and Metro by T-Mobile, and of course there was Verizon’s $6.2 billion purchase of Tracfone. What happens now when Ultra becomes part of the T-Mobile prepaid group? And for that matter, here are other questions being asked:
What does this do for competition?
What should MVNOs be doing NOW if indeed this acquisition goes through?
Why should we believe that this is good for everyone?
I had the opportunity to speak with Peter Adderton about this over the past few days. Peter, as you know is the Founder of Boost Mobile (and current CEO of Boost Australia) and the brains behind the recently launched MobileX. Peter was adamantly opposed to the T-Mobile/Sprint merger, spending countless hours and over $200,000 of his own money appearing before Congress, meeting with the heads of the Justice Department and FCC, briefing numerous Attorneys Generals and appearing on numerous national news programs on the downside of that merger going through. No surprise that almost 100% of what Peter predicted would happen actually happened and he is concerned again about competition, pricing and what will happen to consumers if this Ultra/Mint/Plum acquisition goes through.
Adderton started off by telling me that,
“I have spent the last few years trying to raise awareness that MVNOs need protections and regulations of the effects from the regulators have made on both consumers and dealers by allowing these independent MVNOs to be sold. The regulators have decimated the MVNO market by allowing these MVNOs who have achieved scale (in their business) to be sold to MNOs. It’s a Catch-22; most new MVNOs only get better pricing by scaling (with thousands of new customers) but you cannot reach scale WITHOUT good pricing.”
With regards to competition, Peter continued,
“An acquisition like this reduces competition no matter how you look at it. Customers need independent MVNO brands with scale to keep prices low. It’s a fact and this is the reason that MVNOs were created in the first place.”
We discussed the success and failures of some of the MVNOs we have seen, and I asked Peter what an MVNO should do NOW to prepare for this acquisition,
“MVNOs can do little to be honest. We need regulators who have the power to make things right and reverse the damage they have caused by ensuring MVNOs are protected, remove exclusivity clauses (from the carrier’s contracts), remove MRC’s and give pricing that allows new and smaller MVNOs the ability to compete out of the gate. They also need to ensure that a percentage of all of the network traffic at all times come from MVNOs. “
“The bottom is that it’s tough to start an MVNO and it’s getting tougher as the MNOs growth stalls and they seek to acquire the subscribers of their MVNOs. MVNOs who were once niche players are now growing very fast and the MNOs treat them as competitors until they buy them when they get large. The Mint and Ultra deal should be challenged if there are no protections put in place to help smaller MVNOs succeed.”
So, is Peter Adderton correct, or is consolidation something that we are going to have to live with? We could be months away from closure on this acquisition and a lot of things can happen between now and then. However, those MVNOs who are in the game for the long run should not sit by and patiently wait for this to happen. Steps need to take place NOW to ensure that their businesses will remain profitable and poised for growth.
What Does the National Wireless Independent Dealer Association Think?
Another group that has been very vocal and supportive of independent dealers is the National Wireless Independent Dealer Association, NWIDA.
Adam Wolf, President of NWIDA reached out to me after the acquisition announcement and said,
“Obviously, our concern is the dealer network. T-Mobile has already terminated the vast majority of their dealer-owned stores, and if they are able to purchase Ultra, we’re very concerned about the thousands of independently owned distribution doors that are in place today. When Verizon purchased Tracfone, they closed all the Total shops – and while they’ve rebranded with “Total by Verizon, not all the dealers reopened. The independent dealers need to be able to expand – not be contracted. We continue to talk with the carriers and MVNOs to help them grow their dealer networks – not shrink them.”
Disclaimer time. I work with all the carriers, their aggregators and many, many MVNOs on a regular basis and even do business with a lot of them. From my viewpoint as a former “carrier guy” who now spends 99% of his time working with and advising MVNOs and new entrants to our space, I try to present both sides of this story. I reached out to other T-Mobile MVNO aggregators and others (Ryan Reynolds at Mint didn’t take my call 😊).
I guess we’ll see how this plays out. Meanwhile, the MVNO growth engine continues with Atrium Unlimited Consulting still receiving 3-5 calls per week from parties interested in becoming an MVNO. If you need assistance or just want to chat about the business, please reach out www.atriumunlimited.com/contact
Until next time, Good Selling!
Jon