Sprint chairman: US market needs real price war

Masayoshi Son tells attendees at the CCA Expo in Texas that the company needs more than its partnerships with rural operators to take on the duopoly of AT&T and Verizon.

Softbank CEO and Sprint chairman Masayoshi Son rallies competitive carriers to take on AT&T and Verizon at the Competitive Carrier Association conference in San Antonio. Marguerite Reardon/CNET

SAN ANTONIO -- Softbank CEO and chairman of Sprint Masayoshi Son said without a big merger in the US market AT&T and Verizon will choke off the rest of the industry.

"We need to fight back," he said. "We can't keep the status quo. The status quo means we will be pushed out and choked."

Speaking at the Competitive Carrier Association conference here Thursday, Son reiterated a message he has been delivering to the US media and regulators for the past few months. He said the US market is out of balance with two massive carriers dominating the industry in terms of both subscribers and profits.

In 2008, he said that AT&T and Verizon controlled 56 percent of the wireless market in terms of subscribers. In 2013, he said the two carriers had 73 percent of the subscribers. He also noted that five years ago the AT&T and Verizon "duopoly" had 67 percent of the wireless industry's profits. In 2013, the two companies took home 84 percent of the profits.

He added that more than 100 wireless competitors are splitting only 16 percent of the profits in the US wireless market today.

"There are 100 competitors out there, but they're all being squeezed by the big two," he said.

Son said Sprint's announcement Thursday that it has launched two partnership programs to work with rural operators to expand Sprint's 4G LTE footprint to markets where the company doesn't offer service will help it compete against AT&T and Verizon. But he said it's not enough.

"We would like partnerships with rural carriers in areas we don't serve," he said. "But in other areas we need even deeper scale to fight back. Without that we don't have enough power."

But winning over skeptical regulators will be tough. For months, Son has suggested a merger with T-Mobile is the only way to break up the duopoly of AT&T and Verizon. But the Federal Communications Commission and the Department of Justice, which are needed to approve the merger, have been lukewarm on the idea. These regulators have said previously that the market is better off with four national carriers rather than three. And they have patted themselves on the back for rejecting the proposed AT&T/T-Mobile merger.

But Son argued that this is the wrong way to look at the industry.

"This isn't really about reducing the market from four to three players," he said. "It's about two players dominating the market and making the market even more concentrated in the past five years. And we have to fight back."

He said what the US really needs is a real price war. He downplayed T-Mobile's efforts to cut pricing. And he said it has not had any major effect on the market. He noted that US consumers are still paying more for their service compared to consumers in other markets.

But Sprint, even with its partnerships with rural carriers, can't ignite this price war on its own, he said.

"We need scale and efficiency," he said. "Sprint is cash flow negative so without scale how can any member of CCA change the situation?"

Still, he admitted that even without a merger, Sprint will survive.

"That's not the issue," he said. "Can anyone take on the big two? We can't have a real fight without leveling the field."

He likened the situation to a boxing match.

"If you have two heavy weights fighting a bunch of scrawny competitors, who will bet on anyone other than the big two?" he said. "But if you level the fight, and if they're all heavyweights, then you can bet on any one of them."