U.S. District Court Judge Victor Marrero may have spoken, but that doesn’t mean it’s the end of the fight, according to Boost Mobile founder and former CEO Peter Adderton.
Judge Marrero released his decision on Tuesday to allow the T-Mobile and Sprint merger to move forward after 14 state attorneys general filed suit to block it. Judge Marrero said he rejected the states’ objections on three key points, including the idea that the combined company would pursue anticompetitive behavior that would create higher prices and lower quality services.
Adderton was an early opponent of the T-Mobile/Sprint merger, in part because of his interest in seeing that the companies divest their prepaid businesses so that he could step in and control operations. Boost in the U.S. launched in 2001, and it was the first MVNO to use Nextel’s iDEN network. Its strategy was to go after the young adult market in inner cities. Sprint acquired Boost Mobile when it bought Nextel in 2005.
When it became clear that Dish Network would be acquiring Sprint’s prepaid assets, including Boost’s 9.4 million subscribers, Adderton’s attention turned to the satellite broadcast company and its expected treatment of Boost dealers and employees.
For many months, Adderton has been closely watching the transaction unfold and last week ran an informal vote on Twitter about the chances of it being approved or disapproved (the majority said “approved”). On Friday, he reported hearing that the judge had made his decision, his staff was doing edits and that a decision could come in less than 10 days.
Adderton told FierceWireless on Tuesday that he thinks a lot of people are looking at the judge’s decision as vindication that the merger is good for consumers. “I think the point’s being missed” that this is a judge who had a lawsuit in front of him; he looked at the two sides and decided the attorneys for the companies presented the best argument. “It just shows the state AGs didn’t do as good a job” as the attorneys for Sprint and T-Mobile.
“From my perspective, the fight isn’t over,” he said. “It isn’t over by a long shot.” For it to be over, one would have to assume that all of the promises all of the companies have made will come to fruition, and he doesn’t believe that’s the case.
For its part, Dish co-founder and Chairman Charlie Ergen said in a statement that Dish is eager to begin serving Boost customers while aggressively growing the business as a new competitor, bringing lower prices, greater choice and more innovation to consumers. “We look forward to the Boost employees and dealers joining the Dish family,” he said.
At one point in his decision, the judge noted that despite Sprint’s brand perception issues, Boost has enjoyed remarkably positive consumer perception. Prepaid customers tend to be relatively price-conscious; their incomes range from about $20,000 to $45,000; and they’re more likely to have subprime credit or be more cash-constrained than postpaid subscribers.
The judge also said the Boost divestiture would position Dish well with respect to numerous factors. Angela Rittgers, a senior vice president at Boost, and Dish Executive Vice President for Corporate Development Thomas Cullen both testified that Boost will continue to operate smoothly under Dish and that Boost's distribution model is already quite similar to that of Dish, which will help accelerate Dish's plans to expand its distribution to areas not currently well covered by Sprint.
Boost customers also will use the New T-Mobile network rather than the decidedly poorer-quality Sprint network. Bearing in mind that Sprint's poor network quality drove over 44% of Boost's churn, “this network improvement will further strengthen Boost's viability under Dish,” the judge said.
The fight continues
Is there a way for Adderton and investors to get Boost back? Adderton said he thinks there will be opportunities to re-invest, but he’s not talking specifics.
There are a lot of expectations on Dish, and he suspects there's a lack of understanding about how much it costs to retain a brand like Boost. For example, the costs to subsidize an iPhone 7 or 8 for $49 or less for low-income customers is not a model Dish is used to implementing, he said, adding that Boost is just a small slice of the cake that’s going to Dish and it’s the part that no one really likes. Plus, there’s no commitment that Dish has to keep Boost or its dealers around. “There is zero commitment required by Dish to do anything,” he said.
“I’m not giving up,” he said. “Absolutely, we’re going to be fighting hard. Dish could prove us wrong … I just don’t think that that’s likely.”
In summary: “Stay tuned,” he said.