T-Mobile is still attracting new wireless customers even as rumors swirl that its merger with Sprint is on the ropes.
The nation's third-largest wireless carrier said Thursday that it added a total of 1.7 million new subscribers in the first quarter of 2019. About 1 million of those customers were highly valued postpaid customers, who pay their bills at the end of the month. The company also reported a record low churn rate, or the rate at which customers leave its service, of 0.88%.
T-Mobile's success in attracting new customers comes as rumors circulate that the company's deal to acquire wireless rival Sprint is in trouble. Top executives from T-Mobile and Sprint have been in Washington for the past week meeting with regulators at the Federal Communications Commission and the Department of Justice to convince them the merger is necessary for the companies to compete effectively with Verizon and AT&T, which together control more than 70% of the wireless market.
Specifically, they argue that a combined T-Mobile and Sprint would actually lower prices for consumers rather than raise them. And they say the merger will also let them combine their wireless spectrum assets to ensure that speedy 5G wireless service gets to more Americans, especially those living in rural regions.
On the call with analysts to discuss the quarterly results, T-Mobile CEO John Legere said he thinks the company is in the "final innings" of the regulatory review process.
"We've spent the last 12 months sharing our story and laying out the facts and proof about how the new T Mobile will deliver the nation's first broad and deep nationwide 5G network, supercharged competition, and ... create thousands of American jobs, starting on day one," he said.
He added that he's "optimistic and confident" that regulators "will recognize that this merger is good for consumers."
"I'm pleased with the progress we have made on our merger and the process so far," he said. "And I still expect regulatory approval from the DOJ and the FCC in the first half of this year."
In reports, Reuters and The Wall Street Journal cite unnamed sources who say they have concerns with how the deal is currently structured. This has led to some speculation that regulators may ask the companies to agree to certain conditions or to spin off aspects of the companies to get the deal approved.
But Legere tried to throw cold water on that speculation, saying he hasn't had any reason to think about these "alternate universes or structures."
"This deal as structured we believe is pro consumer and pro competition," he said. "As the regulators continue and finish their review process it will be approved ... I feel very good about the deal, as it's structured."
On the call, Legere and the other T-Mobile executives continued to lay out their arguments. The biggest benefit they highlighted was the nationwide 5G network they say they can deploy with Sprint's spectrum assets. T-Mobile CTO Neville Ray emphasized the importance of using Sprint's 2.5 GHz "mid-band" spectrum combined with T-Mobile's own 600 MHz "low-band" spectrum to lay a strong foundation for ubiquitous 5G. Ray said there really isn't any other mid-band spectrum left for the FCC to auction, which makes the merger with Sprint so critical.
"The combination of T Mobile and Sprint creates that mid-band opportunity in a way that cannot be created in the US marketplace over the coming years," he said. "We can solve [this problem] with the combination of T-Mobile and Sprint and really move forward with a tremendous 5G experience with breadth and depth."
But analyst Craig Moffett of Moffett Nathanson said in a research note following the earnings that in spite of T-Mobile's strong arguments for how the merger would help it build a nationwide 5G network, he doesn't see regulators going for it.
"We understand the 5G-imperative argument," he said in his note, "and T-Mobile's regulatory team has done about as good a job as possible selling the merger. But the politics are the politics, and, well, let's just say that we're not optimistic."
Originally published April 25, 1:29 pm PT.
Update, 3:50 p.m.: Adds comments from the earnings conference call and comments from an analyst.