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Season 2, Episode 8: T-Mobile / Sprint

Season 2, Episode 8: T-Mobile / Sprint

Mon, 21 May 2018 14:34

If you thought the telecom business was boring, think again! Acquired brings you an episode packed with more drama than an entire season of Game of Thrones. Starting with a death in the family, we follow a tale of fortunes lost and rebuilt, bitter battles between rivals who once worked for each other, and at the center of it all, a lesson in the power of stable cashflow businesses. This is one call you don’t want to drop!


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the reinvention of John Legend. Legend of John Legend. Like John Legend. Yeah. Yeah. Yeah. Welcome to season two, episode eight of acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenfall. And we are your hosts. Today, we'll be diving into the recently announced, or should I say, proposed but not regulator approved sprint team mobile merger. David, you're laughing. I'm laughing. Who knows what's real these days? This may be yet another episode where we cover an acquisition much like the Broadcom Qualcomm merger that did not actually happen. And so only time will tell, but now seems like a really fun time to dive into the topic. Here are the crazy stories of both of these companies dating back over a century and dig into the genesis of where most of the technology that we use today really, really came together here in the northwest and specifically in Bellevue, Washington. Well, we'll have to dive in. David, don't give me your answer now. Wait till grading. Are we going from four carriers to three or from two carriers to three? Well, we'll have to wait for that. But it's funny in our last episode and the PowerPoint episode, we were joking that they're like in the 1980s. There were like 11 people who worked in technology. And who knew that there actually was a related industry that had even fewer people working in it. And so the telecom and the wireless industry in the 80s and 90s had like six people working in it. And as you alluded to Ben, almost all of them were in Bellevue, Washington. That's true. Well listeners, if this is your first episode and you like it or if this is your 50th episode and you've been with us for a long time, we would love a review on Apple podcasts. Really appreciate any any time you could give to doing that helps us promote the show to get great guests and to justify the increasing amount of research that David and I seem to be obsessing over episode by episode. If you are new to the show, you can check out our slack at Join the 1300 of us that are talking about any tech news really, but big, big mergers, acquisitions, IPOs, major landmark events that are happening between big corporate entities. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and founders. So we knew there's a natural fit. We know the host of founders. Well, David Senra, hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together and then they say it's like the best curriculum for founders and executives. Errili, as we use your show for research a lot, I listened to your episode of the story of Akiomarita before we did our Sony episodes. This incredible primer. You know, he's actually a good example of why people listen to founders into acquired because all of his great-sunchmothers and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows and there's such good compliments is on acquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third, fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion, the greatest suchpreneur to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin Land's my hero. So the reason I did that is because I want to find out like I have my heroes. Who were their heroes? And the beauty of this is the people may die, but the ideas never do. And so Edwin Land had passed away way before the apex of Apple, but Steve was still able to use those ideas. And now he's gone and we can use those ideas. And so I think what requires doing what founder trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well listeners, go check out the founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders, go check it out. All right. Without any further ado, David, do you want to dive into the history? In fact, of these behemoth, concocted, merged, unmerged and twisted companies. Well, how long do you have been? Yeah, listeners, we're only a couple minutes in right now, but you know the final episode of length. We don't. I suspect it ends up being long. Well, let's see. Let's see how fast we can get through this. Well, like so many of our stories on this show, this one, the story of the modern wireless telecom industry and how it came to be starts also in Silicon Valley on the Stanford campus, unlike many of the other stories, though it doesn't stay there for long. So let's go back to 1969 on the Stanford campus. And there's an undergrad there named Craig McCaw. And Craig is from a fairly wealthy family in Washington state. His father, Elroy McCaw, has been a successful entrepreneur in radio and television broadcasting kind of throughout the Northwest and had been early in local radio stations, local TV stations. And then just had started at this time to get into the very, very nascent cable television business, which was just emerging the late 60s, early 70s and then would obviously grow throughout the 80s, 90s, 2000s. But unfortunately, tragedy strikes very, very sadly. And Craig loses his father. Elroy dies suddenly of a stroke in 1969 while Craig is the oldest of four brothers and he's still an undergrad at Stanford way too early to lose one's father for all the children. But Elroy passes away and it turns out that the company, even the family, you know, was very successful. The company was very successful. They had a lot of debt on the company as many of these types of broadcasting companies do and it wasn't structured very well and they had to when Elroy passed away, they had to basically pay off all this debt. And so it triggered really disaster for the company and the family. They had to sell everything. They had to sell the family's house, the family had a yacht, they had to sell the yacht. They had to sell all the pieces of the business except one tiny little bit of the cable assets, which again, this was like cable TV was like non-existent in this time. But a very, very small cable company, division of the company in Centralia, Washington, that had somewhere between two and four thousand subscribers. That was all that was left of basically all of the family's assets. And so Craig, he's the oldest of the brothers. He's still an undergrad at Stanford. I think this is the next year, probably 1970. He's a senior while he's a senior during, while going to school, he takes over running the company to do something and kind of turn the family's fortunes around. And slowly, and he focuses on the cable business. And slowly, he builds it into a kind of major cable empire over the next 10 to 15 years. And so by the early mid-1980s, the company was then called McCaw, cable vision. It was the 20th largest cable pay TV provider in all the United States. It was very successful. And Craig's running it and he's still very young. And then something else happens in the early 80s, the advent of wireless cellular phone technology, analog, cell phone technology is invented. And to make these calls work, this is the day's like people's envision this being used as car phones for like wealthy businessmen. To make the technology work though, you need to have wireless spectrum, rights to operate the cell services over. And so the FCC, they try a bunch of things to allocate this spectrum throughout the country and get entrepreneurs to build cell phone businesses. They end up landing on holding a lottery. So they literally, they hold a lottery, you file an application to win the right to a spectrum license in a given city or geography. And then they hold a lottery to see who wins it. It's certainly fair, David. It's fair in some sense. And Craig, you know, finds out about this. It's much disgusting. And then they start to seize the parallels between the growing cable industry that he's been a part of over the last 10 years. And what the cell phone wireless industry could be. And sees this as kind of a land grab. So he applies for the lottery in a whole bunch of geographies throughout the country. He wins some of them. And others, there are lots of the like plumbers that are applying and accountants like just at random people like are applying to win the spectrum license. It reminds me of the dot com grab. It totally, it's like a dot com domain name grab except there are far fewer spectrum licenses than there are dot com names out there. After the lottery is held, Craig then goes out and he buys a lot of the licenses from the winners and ends up with basically a giant amount of real estate of spectrum real estate throughout the country. He says, okay, well, I'm going to build a cellular telephone company alongside the cable company. He uses debt once again on the cable company to finance building out this wireless telephone network ends up calling it McCaw Cellular. And he's kind of first to the game before any before AT&T before what was then MCI, sprint, all of the large wired telephone landline carriers get into the business. McCaw Cellular is the biggest cell cell phone business out there or cellular network business. And David looking into this, the company Lynn Broadcasting comes up. Do you know how that fits in here? Lynn Broadcasting, I know a little bit. So there still was again, all these businesses are all related. There's there's TV broadcasting. So these are like your local ABC NBC CBS stations that are literally broadcasting from antennas in cities. Then there's cable TV pay TV. So that's where you're getting the, you know, in these days it wasn't ESPN yet or, you know, the, but pay TV channels separate channels and then cell cell business. So McCaw had gotten also back into the TV broadcasting business that his father was in. And so they acquired Lynn Broadcasting, which is a major broadcaster on a whole bunch of local TV stations throughout the US. Is a big purchase and it was I think heavily debt finance to make it happen $3.4 billion purchase. And I believe that Lynn operator, maybe still operates a bunch of the local TV stations in New York City. So they were one of the biggest local broadcasters in the country. There's a great New York Times piece from 1990 called Craig McCaws high risk phone bet. Listeners, if you've never checked out this thing, the New York Times has this amazing tool called the Times machine where they basically scan all of their old newspapers before they were digital and then present them as digital articles in the archives. The same way you'd be reading any other web based New York Times article and actually show you here's the place the New York Times business section where this occurred and they highlighted it. It's super cool that this is on the internet. And there's a great line in this piece talking about the purchase of Lynn Broadcasting, the gamble to go and build out a cellular telephone network. They say essentially Craig McCaw is betting that the public will want cellular phones. Today about 1.5% of the population uses car phones or portable phones. The hope is that figure will rise to 14% in just a decade. This was 1990. 1990. Oh my gosh. 14%. I would assume it had to be higher than 14% by 2000. I mean, we haven't seen like I had a cell phone in 2000. Yeah, I was probably, probably dramatically higher, but it is interesting how you wouldn't have forecasted that the majority of computing or personal computing would happen another decade later on that same form factor on those same data networks. But you know, that's a lot of it as car phones. I mean, I remember when I was growing up, my parents were lawyers and they had car phones in their car. Like it was essentially a cell phone, but it was wired, hardwired into the car. That's what people thought it was. They didn't see cell phones, just like they didn't see smartphones that it would all become. Yeah, totally crazy. So I should have mentioned earlier, I don't think I did. Because all this was happening in the beginning days, Macau graduated from Stanford, undergrad, and then moved back up to Washington and ended up settling in Bellevue. And that's why Bellevue, Washington, just across Lake Washington from Seattle is the, at least US, if not World Headquarters of the cellular phone and wireless industry, which we'll dive back into. So 1986 comes along and the cellular business is growing so much that Macau ends up selling off the cable business entirely for $790 million in 1986. So 15, just 17 years later after the family being completely destitute, they sell off the cable business for $790 million in 1986. That's pretty good. They focus solely on the cellular business, keep growing that over the next couple years, and then four years after Ben that article that you read in the New York Times in 1994, they end up selling the whole company, the cellular business to AT&T, the old legacy telephone company for $12.6 billion. Again, this is 1984, that's a lot of money. The company gets renamed AT&T Wireless. It becomes AT&T's wireless division that barely existed before then, which is just crazy. Ultimately, about 10 years later in the early 2000s and 2004, AT&T Wireless merges with the company called Singular. Some sure many listeners do here in the US. The company keeps the AT&T wireless name and moves to Singular's headquarters, which are in Dallas, Texas. So that's why AT&T is in Dallas instead of in Bellevue now. But the core of it all came from Bellevue. 1994 Macau cellular trivia fact, David, what else from the acquired episodes that we have done was related to Macau cellular and happened in 1994. Oh my gosh, that's a tough question. I should know this, of course. It was a gentleman who was angel investing. Oh, yes, of course, of course. How could we forget? So instrumental to everything about acquired. Tom Alberg. Tom Alberg. Tom was an executive at Macau cellular and was doing a lot with cellular data. That was the reason he was introduced to Jeff Bezos when Tom started to do some angel investing because the internet sounded very similar to cellular data to whoever introduced them and decided Tom would be the right person to talk to. Oh my gosh. I can't believe I missed that connection. Literally, Amazon comes out of this. Yeah. I mean, Bezos would have been successful. I'm sure. Regardless. But certainly, Modrona and thus acquired is a direct offshoot of all of this. Tom, of course, being one of the founders of Modrona a few years later. So back to Craig and Macau after this transaction. Craig is now one of the wealthiest people in the world up there at this point in time with Bill Gates, also in the Seattle area. But he's not done. He's still quite young. He's not done with the telecom industry. The sale to AT&T was all in stock. So Craig is now one of the largest shareholders of AT&T, this huge 100 year long company. But he doesn't join the board because he doesn't want to have any conflicts because he wants to get back into the business, into the telecom business and start competing with them right away all over again. So he starts building an equity stake in a company called NexTel. I suspect many listeners remember from the late 90s, early 2000s, the NexTel Direct Connect walkie talkie on your cell phone. Craig gets involved in NexTel, starts buying up shares by 1995, just a year later. He controls the majority of the equity in the company as the controlling shareholder. NexTel was not doing very well at this point in time. He completely turns them around. You know, they end up introducing direct connect. They become, they grow, hugely become much larger. They end up then, he sells NexTel in his second transaction to an old legacy telephone company in 2005, 10 years later, to Sprint. He sells NexTel for $35 billion. Sprint becomes Sprint NexTel and that is the core of Sprint's wireless business. So thus from one guy from Craig McCaw comes both AT&T and Sprint that we know and probably don't love today. Yeah, but David, that transaction happens in 2005. I was going to do your transition for you. Something happens a year before 2005 and 2004, Craig McCaw does one more thing. He's still not done. Exactly. He's still not done. He does one more thing. He's like Steve Jobs of Telecom really. One more thing. In 2004, he starts a company called ClearWire and Craig is starting to see, I don't know that he necessarily see smartphones coming in the iPhone, but he does see that data over cellular telephone networks is going to be a big thing. Smartphones exist to this palm. There's Microsoft, Windows Mobile or whatever they call it back in the day. Blackberry, all of those things. So he found ClearWire. And ClearWire is essentially a wireless company, but instead of focusing on voice, it focuses on data. So they end up doing in November 2008, they do a huge deal with Sprint, who just a couple of years earlier, Craig and Soul, next L2, and Sprint buys half of the company. And ClearWire essentially becomes the data part of Sprint's network, what would become their LTE network. At the time, it was using a technology called YMax, which we're not even going to go down there, rabbit hole. In the interest of time and our sanity. Yeah, it is worth noting, look, for listeners, we're already in alphabet soup of sort of companies and companies that are acronyms and mergers and acquisitions and spinouts, we're covering like 10% of the depth of what happens here in these corporate histories. We're going to sort of touch lightly on AT&T's breakup by the Department of Justice and the baby bells and all that, but the amount of company smashing and reassembling from different pieces over literally a century here. We just don't have time in the episode to do it all. It's like a particle accelerator. These companies are smashing at high speeds in the one another. That's a picture too. But I have two small real fun notes before we wrap up on the McCaw portion of the episode here. One, Craig finally does sort of rest his pen after ClearWire has not started any further telecom companies. But he does pretty well through all this, he currently holds the record for the most expensive car ever purchased in 2012 at an auction. He bought it in 1962 for RRE250GTO for over 38 million. Lest you think all of this is just boring telecom stuff, there is a lot of money to be made in these industries. And we should say too, in addition to $38 million, historic sports cars, the McCaw family is also one of the most incredibly philanthropic families. McCaw Hall and Seattle, tons and tons of charitable organizations. I think much like Bill Gates, their legacy as a family will actually, they'll be rumored more for their philanthropic efforts than for the incredible industrial, the value they created in industry. Basically, every arts organization in Seattle has the McCaw family to thank for their patronage and as well as so many other organizations in Seattle throughout the country in the world. The other really fun note listeners may know that I was involved at Madridona in starting a company called Rover is now a very successful marketplace in many ways led to lots of great things for many people in the Seattle tech scene. And for me, it's a big part of starting Wave and our focus on marketplaces. Rover originally was not called Rover. It was originally called a place for Rover. It was for Rover. I believe still the official name, incorporation name of the company. I signed the incorporation documents back in the day when we first started it for a place for Rover. We wanted to get Domain name. We wanted to get the domain name. And so we were like, this was super early days. We were searching around like, okay, like, who has it? Like doing who is, look up, all this stuff. It turned out that the domain name was owned by Clearwire because Clearwire had had a product that they introduced and then canceled called the Rover. And this was like a hockey puck size device that was essentially a Wi-Fi hotspot. This was like one of the first Wi-Fi hotspots. And again, Clearwire was like a cellular data company and they were like introducing this idea of cellular data. So this product called the Rover. And they somehow acquired the domain name They were selling it. They had canceled the product. So this is 2011, summer of 2011 when we're starting Rover, Rover, the company. And they had canceled the product. So they were just sitting on this domain name. It turned out that one of our partners at the time at Medrona was Brian McAnjus, who had been the CEO of Aquanum, which was Microsoft's largest acquisition before Skype and then LinkedIn. And Brian was a partner with us at Medrona. And he was on the board of Clearwire. And knew Craig McCullough really well and John Stanton, who's going to come into this story in a minute. And so we said to Brian, hey, you're on the board. Can you talk to the company, see if we can buy it from them for you? Whoever in IT administers that domain like, see if you can get there. I know. You've got this like park to domain name that the company isn't using somewhere in the IT department. You've got board member. Get it again. We ended up getting the deal done. We bought the domain name. I believe we actually leased it first and then with an option to buy it and then we bought the domain name. And thus one of the world's great marketplaces was born out of McCaw cellular comes Rover. So many things. So listeners, I'm going to guess where David is about to go and there's going to just start to be a lot of companies involved here. And for folks that haven't heard a lot of these companies before, a really helpful thing to do if you're interested is go to this Seattle Times article called T-Mobile Sprint Deal would extend Northwest long wireless rain by Rachel Lerman, great piece. And there's an amazing infographic by Mark Nolan. It basically has how all of these companies are related to each other, the spin outs, the people behind them, the years that they were, that each of the transactions occurred. If you are sort of sitting there on your phone and you want to tap into the show notes and check it out, it could be sort of helpful in visualizing. It's certainly helpful as we sit here doing research to keep ourselves straight. Indeed. Indeed. So to pick back up the story. And again, we apologize for all these companies. Hopefully the graphic will help keep it straight in. And we'll try and be as straightforward as possible here. I would argue the second best spin out and thing to come out of the McCaw Cellular days besides Rover, of course, being the first. Amazon being third. Amazon being third, yeah, for sure. It turns out when they were starting the cellular division of McCaw, there were two other people who were pretty instrumental in that besides Craig McCaw. One was a guy named John Stanton. And John was then a recent graduate from Harvard Business School. And he became the first employee on the cellular side of the company. And he eventually became the COO of McCaw Cellular. And the other person that ended up being instrumental and what came next was Teresa Gillespie. Terry, she goes by Terry, Terry Gillespie. She was an SVP at McCaw and was the company's controller. She had been a public accountant before that. The two of them, they do two important things, one, they get married, that's, I don't know, which they would say is more important of that. The other thing they do is they start T-Mobile. It wasn't, of course, called T-Mobile at the time. Not directly. But T-Mobile, the T-Mobile we know and love that we are talking about in this episode, John LeJair, the uncarrier. It's John and Terry who started that. T-Mobile USA. T-Mobile USA, yes, not Deutsche Telecom. But we'll get into all that. Okay, we're going back to the late 80s, early 90s. John and Terry, I don't know if they were married yet, but they're at McCaw Cellular. Terry's on the finance side. John is the CEO of the Cellular Business. And John had joined in 1982 and the spin out we're about to talk about happened in 1994. So a good 12 year span of being there at McCaw for John's family. Actually, actually 92, it started the, there are too many companies to keep track of. But leading up to 1992 in a couple years before, John started realizing, so the focus of McCaw was urban areas. Again, we're thinking like cell phones were car phones at this point in time. Who used car phones? It was like business people, cities, urban environments. These were not like out in the countryside. So there were all these spectrum licenses that, you know, McCaw on some of them, but a lot of them were just ignored out in rural America. And John kind of had the vision that like, hey, this might, this wireless thing, it might become like an even bigger industry someday. And maybe everybody will use this. And so he had started buying up these licenses, these spectrum licenses in rural parts of the country, starting in rural Washington, I believe. He decided to leave McCaw Cellular. Again, this is like an enormous company. Like, people thought he was crazy at the time, like he and Terry, career suicide to go from like the leading wireless company in the world to, you know, working in the booties essentially. They're acquiring these licenses. So they start a company they call it Pacific Northwest Cellular. They're rolling up all these regional markets. They end up in 1992 acquiring another regional cellular company called General Cellular Corporation. They team up with Helmut and Friedman, the big private equity firm based in San Francisco to co-purchase it. And then a couple years later than in 1994, they merge Pacific Northwest Cellular and General Cellular into a company they call it Western Wireless. At this point in time, they're offering service to 19 Western states under the brand Cellular One. I don't know if that rings any bells for anyone. Cellular One Telephone in rural areas. And at this point in time, they've started to get some spectrum assets in urban areas as well in cities. And they call that part of the voice stream wireless. A couple years later in 1996, they take the company public. Then a couple years after that, in 1999, voice stream, the urban, the city focused service has actually been growing a lot. They spin that off into a separate public company in 1999. Two years later, 2001 Deutsche Telekom comes in, the big German telephone company wired in wireless operator and they buy voice stream for $35 billion and rename it T-Mobile USA. And that is how T-Mobile is born. And think about this. Again, just to recap, McCaw Cellular is sold in what was it? 1994 for $12.6 billion. So a lot of money. Not that much longer, 2001, so what's that seven years later, the protégé at McCaw, John Stanton and his wife Terry, they have created this crazy thing, this rural operator turned into voice stream. They sell that for $35 billion to Deutsche Telekom and it becomes T-Mobile. They actually retain Western wireless, the Cellular one, the rural company. That ends up getting acquired a couple years later by all-tell for $6 billion. All-tell ends up getting split up and getting acquired by mostly by Verizon, small parts of it by AT&T. And is a big part of the Verizon network now. So we now have complete coverage. We now have John Stanton's starting Western wireless selling to all-tell which becomes parts of Verizon. We have McCaw Cellular itself getting what became AT&T wireless. Nextell becoming Sprint. Nextell becoming Sprint. And then lastly, voice stream becoming T-Mobile. So we have one more event here, one more merger yet to cover that will be the real bulk of this episode. But that is how we've gotten to where we are today. Well, I don't know if it'll be the bulk. This is, I mean, all this backstory is, I hope listeners you've enjoyed it. Like, it's so fun. And it's fun for us being from Seattle and knowing a bunch of these people and all the people around it. So John and Terry, they do continue in the wireless industry. They started a company called Trilogy which had owned many international wireless assets. And then these days, as mostly they've turned it into a venture investing firm based in Seattle. They also own the Seattle Mariners today. They do. Incredible. And they are supportive and amazing investors in PSL and some of our companies too. Yep. So it all comes back home. Okay, let's fast forward a little bit. The industry basically operates at steady state. From our point of view, there are like 57 mergers that an acquisitions that happen that we're not even like, I can't even keep track of all them. But basically, this is the state of play. You have 18T and Verizon, which are the two largest carriers in the US. You have Sprint, which was next sale is the third largest. And then you have the new T-Mobile, formerly voice stream owned by Deutsche Telekom. That is the fourth largest carrier in the US at this point. And sort of of any of those, the one that's actually breaking the steady state and is sort of doing all sorts of amazing disruptive things to steal, share pretty much exclusively from Sprint, but what to that? They're stealing some share, they're doing some stuff. But actually, it's kind of sad. I mean, they're owned by this super conservative German and German Telekom company. The first decade really from the voice stream acquisition to the first decade of T-Mobile USA is like, it's like, okay. But we fast forward. March 2011. 18T announces a deal that they're going to buy T-Mobile USA. Deutsche Telekom is like, all right, this hasn't worked out. Quite as we thought, we didn't become the dominant carrier in the US. Let's cut our losses. They're going to sell T-Mobile to 18T for 39 billion. So 4 billion more than they paid for it in 2001. But at least they're going to get out of the game, cut their losses. This is going to reunite essentially the McCaw and Stanton and Gillespie branches of the Bellevue Seattle Telekom empires. It's all going to be reunited under one company. It's going to be by far the largest wireless carrier in the US. That was its downfall because the US government and the anti-trust regulators were like, nope. They're like, wait, 18T is going to become the most dominant telephone provider to all of the US. We've heard this story before. We've heard this story before. We don't like it. Despite Bellevue Labs and everything great that came out of that, no. The government says no. It doesn't actually end up getting rejected by, they don't go so far as to actually block the deal, but the company's realized it's not going to happen. They call off the merger. They indicate that it would be a bad idea for you guys to stop doing the paperwork. Yeah, good idea to stop doing the paperwork. So December 2011, the T-Mobile and 18T call off the merger. The T-Mobile is like in a serious bind now. The deal fell through their distant fourth place behind Sprint and way, way behind 18T of Verizon. The company is flatlined. It basically thinks suck. Moral is terrible. 2012, December 2011, the call off the merger. 2012, they do two things. First, they merge with Metro PCS, which was I think the fifth or sixth place carrier in the US. So that gives them a little bit more scale, a little bit more coverage, because remember, coverage is super important. At this point, national coverage is really important. People use their smartphones, or in the smartphone era, everywhere all the time they travel. If you only get data in your home city and not when you're traveling, that sucks. And I think Metro PCS unlocked a new addressable market for them in terms of market segment, because it was the pay as you go. It was the lower cost carrier, they could get their infrastructure and coverage, and then also a new segment of people that were able to use the broader merged infrastructure also. Yep, yep, totally. And we're not even going to get, I'm not going to go anywhere near cellular standards. We talked about that on the Qualcomm Broadcom episode. Listeners, if you care, you can go somewhere else. It's important technically, but we're not even going to go there. But Metro PCS was a public company as a result of the merger, the Metro PCS shareholders own 26% of the combined density. So Deutsche Telekom now owns what's that 74% of the company, and then 26% is publicly traded on the US stock markets. Okay, that's one. The other thing they do is they bring in a new CEO to turn around the company after this disastrous falling through of the merger. And they find... They get really boring, non-polarizing, run of the mill CEO. Yes, yes, that was the plan. So they bring on a turnaround expert, a guy who has just sold a company called Global Crossing. We're not going to get into global crossing. It's like the most boring, wired Telekom conference bridge corporate Telekom company you can imagine. The CEO of it had taken over to turn around the company from bankruptcy, ended up selling it, leading it to an acquisition, a $3 billion acquisition in the year before in 2011. So like, great. We're in them around. He saved it, went from zero to $3 billion. Hopefully we can do the same. Let's bring him on to see what he can do here. This is a guy who before Global Crossing, he had been an executive in the Telekom industry at AT&T for almost 20 years. He'd also worked at Dell, so he had a little bit of, you know, you could argue device, you know, sensibility at that point in time. This was like, relatively early days of smartphone time, you know, 2012, 2013, whatever. Great. Let's bring him in. What's his name again? John Ledger, you know, whatever. Some dude, Telekom guy. He's got cool hair. He's got, he's got long hair. He didn't used to have long hair, but then he left. Yeah, I don't know if he had that at the time. No, he did, I mean, he was like a Telekom CEO. He was like, sorry, he was like totally buttoned up. But then after they, you know, he led to the executive Global Crossing, you know, he sort of like didn't know what to do with his life. He talks about this and he's like, he bought a Ferrari. He grew his hair long, whatever. He comes back in, he's like, to Telekom, you know, again, big German corporate conservative company. They think they're getting like the turnaround CEO here. So John starts as CEO in the fall of 2012 of T-Mobile. And what is the first thing you do? He's from the Telekom industry, but he doesn't know a lot about wireless. He's from the wired corporate wired side of things. So he's like, well, I'm going to learn about what customers think about this company. I'm going to start listening into customer service calls, like literally people calling to complain about there, you know, self-occurrier. So he's been through the first couple of months doing this. And he's just like a gas. He's like, oh my God. This is, I have never heard such vitriol and anger and angst and hatred being spewed from our customers at us about how much they hate us and they hate the industry and they hate carriers and they hate all this stuff. And he's just like, whoa, what have I got myself into? A couple of months goodbye. He's doing this. It's January 2013 at CES in Las Vegas. And CES is, you know, in the U.S. There's mobile world congress in Barcelona internationally, but in the U.S. CES is typically at this point in time, at least where cell phone, both, you know, Android manufacturers and cell phone carriers would launch all their new products and services and whatnot. And so John, this is going to be his first keynote address as CEO of T-Mobile at CES in Vegas 2013. So he goes, they're all scheduled. All the T-Mobile execs are there. He's got this whole thing. It's a keynote. And it's the night before at the hotel suite. And John's there and he's talking with the execs, the other senior execs and it's like, what should I wear? What should I wear at this keynote? Now, to be fair, this is how the story is told today. Who knows what the reality is. But he's like, what should I wear? And one of the other execs is like, well, I think you're, you know, if you want to look cool these days, you wear a t-shirt under your suit jacket. That's cool, right? And like, okay, so they start roughing on that. And the night goes on and apparently things get a little crazy. And John's like, oh yeah, I'll wear a t-shirt. But let's get a hot pink, you know, t-shirt to go with our corporate colors. And I'll, and let's see if, let's go out and let's see if we can get a t-shirt made overnight to put the T-Mobile logo on this hot pink t-shirt. I'll wear that under my suit. Things keep going crazy. John shows up the next morning for this keynote. Not only is he wearing a t-shirt under his suit jacket. He's got a suit jacket on. He's got a sleeves rolled up. He's got a Yankees hat on. And he's got a massive silver chain around his neck. And a bunch of like braid bracelets on his wrist. And like, it took his shirt. So we'll link to video of this for the keynote in the show. That's, it's amazing. So there are all these other T-Mobile, like senior execs, you know, they're in there, like super button-up suits, bunch of them at your P and they came from Germany, like all this stuff. And John's there. And he looks like, I don't know. I don't even know what to, like, somebody trying to impersonate 50 cent. Like, it's like, what's that? Like, how do you do fellow children? Exactly. Exactly. Exactly. It's amazing. So there's literally this moment, we can get a link to it in the video. All the other execs are standing in a circle around him as he's giving his keynote. And I guess like, I don't know, like there are articles about this afterwards. Apparently, he goes off script and makes all this up on this spot. Whether this was all planned, we don't know. But the story is- Which at the time feels like heresy, but if you know about the guy now, you're like, well, of course he went off script. Yeah. Totally. So he goes off script and he just starts like during this keynote, he just starts like talking about his experience of, you know, being on these customer service calls and listening to how much customers hate the industry. But instead of talking about how much they hate T-Mobile, he starts talking about how much they hate AT&T. And he takes all these shots at AT&T calls their network crap. He says there's more truth in online profiles on online dating sites than AT&T has on their network maps. Like it's just crazy. And remember, this is the telecom industry. People go nuts. People like, we haven't seen anything this interesting in decades. And it gets all this press. And people like, wow, T-Mobile Mavericks, they're breaking the rules. And Ledger totally embraces it. He basically goes full on performance art over the next couple years. He gets on Twitter. He starts like, you know. And Instagram. There's like his Instagram's kind of amazing to follow. Aside from his AT&T lambasting, there's like, you know, every Sunday, he's like, here's me grocery shopping and cooking with the fam. Like it's like an intensely personal thing. He does a live show, a Facebook live show every Sunday. I think it's called slow cooking on Sundays where he's like cooking and he's talking about whatever and he's talking about T-Mobile. He does selfies all the time. He like curses all the time. So there were lots of people, I'm sure, been wondering sort of how do you pronounce the guy's name? Is it Liger? Is it Ledger? He had a tweet a while ago that is, I know there's been some questions about it. It's pronounced, quote, ledger as an AT&T is about to jump off the ledge or his whole persona now is like, we know you hate AT&T and Verizon and like, we are your other answer and I'm just going to be so obnoxious about that. They rebrand T-Mobile as the uncarrier because they're unlike any other carrier out there. Ledger, he's like getting into fights on Twitter with Donald Trump. Like it's amazing. He has, so he has 5.7 million Twitter followers now. Randall Stevenson, who's the CEO of AT&T, has 123 Twitter followers and has never tweeted. And you look at Randall Stevenson and he's like, that telecom exec you would expect. And now there's all this controversy. Apparently they colluded with the Trump administration and Michael Cohen and all this stuff. It's just like ridiculous. And all this time, Ledger's just like, F you guys, shouting from the rooftops. The strategy around Ledger has become a corporate strategy where I'll get promoted tweets not from T-Mobile about switching but promoting John's personal account and just tweets that he's made. It's really become kind of the Elon Musk, Steve Jobs, like Cult of Personality. I don't know how it is for employees but that's at least the public perception of the company is that it is the CEO's persona. Yep, totally. It's a complete, it's like, an architected strategy at this point. And Ledger actually talks about it in an interview. This is a quote from him. The strategy behind it, what they decided is the way to win when you're like, have no way to win is you declare victory. Kobayashi Maru. Yeah. I mean, it's basically like he does the Donald Trump playbook. Declare victory, even though you're obviously like winning a nothing, you just declare victory and then you designate an enemy. Then you attack that enemy and the bigger the enemy, the better. And that's just what he did, like T-Mobile declared victory and it totally works. So this was, this all begins in January of 2013. The company has 19 straight quarters of adding over a million subscribers, net new subscribers. It quickly passes sprint to become the third largest carrier. They're basically like, there's this giant like vacuum happening in the industry where like subscribers, mostly from sprint as you were saying, Ben, but also from AT&T and Verizon are just like getting sucked into T-Mobile over the last couple years. You know, it's been this like crazy PR thing with John as the CEO. It's also, they're putting their money where their mouth is and they're wildly innovating on their product offering relative to the leaders AT&T and Verizon in order to get it done. And there's lots of people that swear by T-Mobile. They're like, yeah, yeah, yeah, the service is worse. Like when I go out in the mountains or whatever, there's no way I'm making a phone call. But they have all this cool zero rating stuff where Netflix doesn't count against my plan. There's a bunch of plans that have unlimited data that were like way before the AT&T and Verizon ones. A lot of the ways that AT&T and Verizon plans have gotten better over the last few years are because T-Mobile has pushed the envelope and forced their hand. And honestly, all the credit in the world goes to the US government here because this is why they blocked AT&T buying T-Mobile because they're like this would have prevented competition. What does T-Mobile do? They start like competing incredibly fiercely and it's great for consumers. I mean, five years ago, like it sucked. Like of course people hated their cell phone plans. It was so, so crappy and it's still not good, but it's like way better than it used to be. You're not locked into contracts as much anymore. You have unlimited data plans like all this stuff. And even though T-Mobile didn't like meaningfully steal share from Verizon and AT&T, they did end up making those customers lives better by existing enforcing the hands. Yep, totally. Okay, one more piece and then we're going to wrap it up is that right around the same time that T-Mobile is transforming itself and ledger is joining. This is late 2012, early 2013. Air Emerge is another figure in the industry here. One we've talked about in this season and quite a force unto himself. That is Masayoshi Saan and Softbank. So this is pre-vision fund. This is Softbank itself and Masa through the company. Remember Softbank is the largest mobile carrier in Japan and has investments all around the world in mobile carriers. They decide they want to enter the US market and they want to buy Sprint. And so they end up getting into a bidding war with dish network, the satellite television provider because all this is converging. Like, it always has been. It's broadcasting in cable and telephone and wireless. It's all the same or it's all the same business dynamics. They end up winning the bidding war with dish network. They buy 78% of Sprint in July 2013 for 21.6 billion. And the best part about this bidding war with dish is that Softbank makes the offer to acquire Sprint. dish network then announced a higher offer to acquire Sprint Nextel at that point, which they then decide to retract so that they can focus on buying none other than ClearWire, which they also retract and then ClearWire gets bought by Sprint as well. The drama is just too much. I can't handle all the drama. I thought Telecom was going to be the most boring thing. There's so much drama. It's boring. I think it's boring because I just can't handle this drama. It's too much. I'm quick aside because we would be remiss to cover all this without covering this fun bit of history. Sprint, back before Nextel, when it acquired, Craig McCaw's second act and became the wireless company, Sprint was a landline telephone operator. They were third behind. I believe third behind AT&T, of course, and the Bells being one and then MCI and then Sprint. Sprint, the landline company started as the Brown Telephone company in 1899 in Abelene, Kansas. Eventually became the Southern Pacific Communications Corporation. They didn't like that name. They decided they needed a new name, so they run an internal naming contest. And so they were the Southern Pacific Communication Company and it was actually the Southern Pacific part of it. Comes from the fact that they were part of the Southern Pacific Rail. When you think about that, like American history, like the South Pacific Rail, or formerly known as the Southern Pacific Transportation Company, they actually, there was a judicial decision that made it so that they could start providing long distance telephone service because they had a right of way where their railroads were. So it only made sense that you need an ability to communicate along those lines for your company to operate. They were actually using microwave communications that were lined up along the side of the railway in order to communicate back and forth between their cities. They had this internal communication network that in the early 70s, they decided after this exec unit two decision, they could actually decide, hey, well, we'll lay fiber optic cables because we own that land. We have that right of way, or at least if we don't own the land, we have the right to sort of lease it and use it. And so then they were able to actually open up that internal network to other people, which really circumvented the AT&T's monopoly on public telephony and offered this other option as, you're a, it's a B2B company, like, hey, corporation, do you want to use this private line that we run between cities that we buried a wire next to our railroad? Like thinking about that infrastructure is completely nuts. It's totally nuts. Well, so do you want to finish the story about the naming contest? I would love to finish the story. This is like one of my favorite facts. And I've mentioned it to friends and listeners of the show like, I can't believe this is a thing. Sprint, while a cool word is actually an acronym. And the contest that David was referring to, the naming contest for what would be better than Southern, you know, SPC or the Southern Pacific Communications Company is Sprint, the Southern Pacific Railroad Internal Network Communications. Internal Network telecommunications. Telecommunications. Yes, gotta get the tea in there. Unreal. Well, that's where Sprint comes from. Okay. Back to Softbank and Massey as she's on. They win. Massey likes to win as we have seen on this show and in all of our daily lives. Massey wins. Not only does he win, according to a majority of Sprint, but has been alluded to, dish focused instead on clear wire. He beats dish at clear wire too. Sprint ends up acquiring clear wire as well. In already own 50%, they own the rest of it. Dish walks away. Empty handed. Okay. And then, in 2013, but then over the next couple of years, Sprint is like a punching bag, like literally T-Mobile and John Ledger, even though they're focusing, you know, he's focusing his tweets on AT&T, they are just like literally delivering body blows to Sprint. And like Sprint at that point in time was bigger than T-Mobile. Now they are way smaller. T-Mobile is just taking basically all of their customers. Massey, of course, is not oblivious to this late 2013, early 2014, news comes out that, I think this was probably Massey's plan all along, was you get into Sprint, use that as a way to get into the US market and then roll it up with T-Mobile. News comes out that Sprint and Massey are working on a plan to acquire T-Mobile and merge the two companies. And what year is this, David? This is not now. This is 2013, late 2013, early 2014. Once again, regulators, just like they did with AT&T and T-Mobile. The first time we're like, I don't know about that, you might not want to do that. So they abandoned the deal. Remember this? Which is interesting because they were not the first player, not the second player. Like, I think they were three and four then, maybe three and five. Three and four. But Sprint was three and T-Mobile was four at this point in time. But remember, Sprint sucked. They were not doing what T-Mobile is doing now, which we'll get into in discussion. They were kind of the deal, they abandoned it. It's like, okay, we got to be cool too. We got to be, you know, an uncarrier. What can we do? They're looking around. They're like, oh, we're going to make an investment in a really hip, cool new company. I was hoping you felt this is going to be my... Oh, yes. This is the best part of the whole episode. We're going to be so cool. January 2017, they buy 33% minority stake in the hottest, the hottest streaming music company around. Oh, that's right. That's right. You guessed it, as covered on acquired title. Uh, Jay-Z. Yeah. That doesn't work out so well. So wait, David, do they still own 33% of title, right? Did the title leave so bad off? It does. Does it really? Yep. I think they do. I don't know. Because presumably if this goes through, then like T-Mobile owns some of title. This is what it looks like. I would love to see title with T-Mobile. Anyway, clearly that doesn't work. So now that was January 2017. By mid 2017, Soft Fake and Moss are just like literally, you know, fist-pombing. Like here, your face-pombing. Maybe fist-pom, maybe literally bashing themselves in the head. Like this is not working. Sprint sucks. How are we going to rationalize all this? They're like, okay. If we can't acquire T-Mobile, maybe we'll sell Sprint to you. By the way, as an aside, yeah, you can stream J-Lo featuring DJ Khalid and Cardi B right now on title. Oh, that actually sounds pretty. Definitely to listen to that. Well. Cardi B is awesome, by the way. Okay. So Soft Fake, they're trying to sell, he's like, I'm going to sell Sprint to Deutsche Telecom to the parent company there who, you know, still owns 70-some out percent of T-Mobile. It's great. They can't agree on price. Get the deal down. Finally now, a couple weeks ago, April 29th, 2018, they take a new tack. Clearly, John Ledger, you know, the boring turnaround CEO, like, he's one. He's like the man. We just got to have him do this. T-Mobile and Sprint are going to, they've announced that they're going to merge directly. So whereas before, Sprint was going to buy T-Mobile, then it was Soft Bank was going to sell Sprint to Deutsche Telecom. Again, leaving T-Mobile kind of, you know, they would get merged, but all of it. But, nope, T-Mobile wins. T-Mobile is going to be the combined company. It's going to be based in Bellevue. John Ledger is going to remain the CEO. I mean, they are essentially taking over Sprint. Deutsche Telecom will have a 42% stake in the combined company. Soft Bank will have a 27% stake. The rest will be publicly traded, Massa will be on the board. I love that it's like, build as a merger when it's 9.75 Sprint shares for every one T-Mobile share. No, well, I mean, this shares because the share price, I mean, that share counts don't matter. But like, clearly, T-Mobile is taking over the company here. The enterprise value of the deal. So this includes debt in addition to the equity values Sprint at 59 billion and 146 billion for the combined company, so 87 billion for T-Mobile. And there we have it. As we alluded to in the beginning of the show and talked about throughout, who knows if this is actually going to happen? This is the third time that two of the four major US telecom wireless carriers have tried to merge the government blocked it the first time with AT&T and T-Mobile. And then we're going to the second time when Sprint was going to buy T-Mobile. Why is it going to be different this time? Is the question. Who is these exact companies and their exact market positions? It was a different administration. Different administration. Sure. It was a different administration. I mean, T-Mobile is a majority foreign owned company, so you have a majority foreign owned company basically buying. Always bringing. Owned by itself. Right. Buying another majority foreign owned company. So you could make an argument like, well, it's not really an overseas business buying an American business. So it's more like a foreign subsidiary buying another foreign subsidiary. So at least that's not going to set off the alarm bells that an American company being owned by someone overseas that that sort of transaction would set off. The company is very confident that this thing is going to happen. And they've released lots and lots of materials. It's actually pretty hilarious if you go and look at their T-Mobile's investor relations site. Like, the press release is completely over the top. It's hilarious. And a press release, like the type of language that you put in there, this is like John Ledger writing a press release. It's like, here's all the great reasons why this is amazing for everyone, including people looking for jobs. We're going to create so many jobs. Also, our shareholders should be happy because there's economies of scale. And you're like, wait, wait, wait, wait, wait, wait. Those things. How, wait, say you get how this is going to create jobs while you're, you know, deduplicating a lot of your infrastructure. So, it's almost at the point where they're selling so hard that this is good for everyone in America no matter what position that you're in, that they may even open themselves to the risk of people being like, wait, what? This makes no sense. Well, in the headline of the press release, the headline is T-Mobile and Sprint to Combine, Accelerating 5G Innovation. Okay. And increasing competition. Wait, what? You're literally taking two competitors in your merging them and then you're saying that's going to increase competition. But actually, I mean, I think where I come out on this, why is, why would it be different this time? I actually think that is the kernel of it, which is that the last time it was Sprint, which sucked, buying T-Mobile. So, it was like, okay, you're going to go from, you know, three SEKI and one sort of in now sort of an interesting consumer option to just three SEKI ones. Now you're going from three SEKI and one like, you know, oh, really interesting to a bigger, really interesting one. I think the thesis is like, now we can compete head on with 18T in Verizon with our uncarrier strategy. Yes. I don't know. So, I buy your logic. Here is the explanation from the T-Mobile press release. This isn't a case of going from four to three companies. There are now at least seven or eight big competitors in this converging market. And in 5G, we'll go from zero to one. Like we are the only, we're going to be the only 5G company. That's thin. And this like seven or eight big competitors thing is like, well, I mean, you guys are merging for a reason. Like it doesn't feel like anyone else is really a competitor other than those two. Yeah. Yeah. Well, they're increasing competition because before the merger, there were four companies that's going down to three, but they're creating four new competitors out of thin air. I was going through this. I was trying to figure out like who are the other three or four. I think that they're arguing that it's like two are point earlier in the show that all of these businesses are related that it's like Comcast and it's, you know, Dish Network and well, Direct TV is part of 18T now. So they can't claim that. But it's that there's going to be convergence between television companies and satellite companies and wireless carriers. I don't know. I mean, they're probably right. Whatever I net out is in a similar place to where you net out that like this, there's so much cost associated with building and maintaining the infrastructure necessary to be a wireless quote unquote telephone provider these days that you need to be of a sufficient scale in order to do that and neither team mobile or sprint are. So I buy the argument that we're going from two to three, particularly with the 5G build outcoming, I just think in many ways, team mobile may have sold past the close. On the other hand though, I mean like you need to sell hard because obviously the government blocked it. But it was a different administration blocked it before. All right. It is actually. So I want to say a couple more quick things. So so there is a website. You can go to all for They've actually stood up a public facing website of that's basically a PR campaign to appeal to regulators for folks who have been making pitch decks for for startups. Like there's kind of an amazing allegory. If you go look at their their this investor. creating a robust competition in the 5G era. It's a slide deck that violates all the rules of what you should do to pitch your startup company to VCs. But it's very like in true John ledger style. It's incredibly direct and very like flamboyant about how great they are. So like the first slide of any substance. The title is highly compelling combination. You get page after page after page of like tons of bullet points. Tons of you actually kind of lose the narrative a little bit in how many advantages this is going to have for everyone in the world. Look at those guys. They're a slide that has two different the left side says amazing innovation. And it has the logos of Uber lift Instagram snapchat Tinder and Venmo. But on the right it has a headline called global leaders and it has Amazon Apple Netflix Microsoft and Facebook. And what like I'll just leave it at that like it's it's a really fun slide deck to go and look at. And that department of justice is why you should approve this merger. Yeah. Yeah. Wow. Anyway, that's our section on on risk to why the deal may not get done. Yeah. I don't know if I'm glad or not glad that I'm not a department of justice lawyer. I actually don't know what the right answer is here. I don't either. I on the surface and have after spending four or five hours looking into this. I'm for it. But like I think it's going to be good for if you take the lens of good for competition good for going from two to three people as customers. I'm in on that argument. Yep. Yep. Yeah. I think I am too. Well, category. Well, actually, I want to say one thing before moving out of that's actually more of the acquisition history. In fact, it's interesting to note that the wireless industry was growing massively from the time when soft bank bought sprint until today and soft bank bought sprint. They bought 70% for what was it? 21 billion dollars. 78 to percent. Yep. 70% and today, the enterprise value, or I'm sorry, the market cap, we're not today, but at the day that it was announced was 26.5 billion. I think soft bank lost money. Yeah. Despite the fact that it was a tremendously growing market. T-Mobile has been taking all of the growth. For a number of years, T-Mobile was growing at more than 100% of the industry, meaning that all of the growth of the industry was going to T-Mobile. Some of it was going to other carriers, but they were taking so much share from the other carriers that as much as the whole industry grew, T-Mobile grew more. And most of that was at the cost of sprint. In acquisition category, I'm trying to remember how we categorize Zillow Trulia and Alaska Virgin, because it's in that same category of consolidation. For folks who are new to the show, usually we say people technology, business line, asset or other. I guess it's a business line, but it's the same business line that they have. So it's really, you know, I think it's just consolidating to realize economies this scale. 100%. And the one thing that we haven't touched on yet is there actually is kind of a synergy here where, and, oh man, we need like a buzzer. Like how many episodes have we made since I last said synergy? I hope a lot. But there actually is something that makes a lot of sense here. And that's that the un-finalized 5G network spec, there's a lot of sort of things that may be 5G. So when people are talking about 5G, we don't yet quite know what it is. And it's not just adding one more G. Like it's a very different thing. We neither are qualified to nor have the time to go into all the technical things here. But basically, people believe that the 5G network is going to require a lot more antennas. So it's going to be a very expensive build out. You're going to see in some sort of all over cities that it's going to require a much higher, I believe it's a much higher wavelength. Let me look this up real quick. Much higher frequency spectrum. So T-Mobile has lots of spectrum in the 600 megahertz range where they operate now. You're going to need a much higher frequency spectrum in order to deploy the 5G networks. Guess who has that from the clear wire acquisition? It's sprint. So sprint actually has the spectrum that is likely needed for what 5G will be. They have no money. They're way, way, way in debt. So sprint has no way to do the expensive build out necessary to compete on the spectrum that they actually have the rights to. And so T-Mobile, while still not in an amazing cash position, is in a much better place than sprint is to actually build out the network that needs to happen to run the next generation technology. So imagine VR over 5G and the super high bandwidth things. So there is something that makes lots of sense of, hey, you guys sprint have this asset, but lots of debt. We're in a decent financial position and are a growth company. Bring that over here. We'll develop it and then we can really compete. Maybe you can argue that in the not too distant future, Comcast and the like our competitors in this world, because like, come 5G, are you still going to have a wired internet connection into your home? Probably not. Right? It's just more convenient. Like, why would you do this? Is it going to go the way the landline? Like if all of the video content, television, and faster internet is just why would you run a wire into your home and have a thing? Just have your wireless devices, right? Who needs Wi-Fi if you get? It depends the speed, man. I love my gigabit connection. Oh, totally. But what if you get that over wireless? Yeah. And that's the thing. I don't know enough about 5G of what that will look like yet. Yeah. Or how far away it is. Yeah. So yeah, totally consolidation for the business line. I'm scared of what would have happened otherwise. There's just too much here. There's one thing I want to throw out. Yeah, what would have happened otherwise had this merger not happen? And like 50% chance that it doesn't. That it doesn't. Yeah. This is something I wanted to sort of ask you and pick your investor brain on. After the deal was announced, both companies' share prices dropped dramatically. Neither companies' shareholders liked this deal. And so, you know, it's interesting that they can announce a merger that's going to have a certain enterprise value that places a value on sprint at, you know, that's based on their current market cap. Their market cap is dropped. Interesting. As they are working the deal out, so sort of how does that work? What happens? What does it signal about the shareholders of those companies? Does it mean that they shouldn't do the deal or that they can't do the deal? Because there's not enough. I don't know. I wonder if it actually doesn't say much about the strategic value of the deal, but more about the regulatory risk. Like, if you're a shareholder in those companies and it's a stock deal, a combination, and since both companies share price drops, I wonder if the thesis that investors have is like, there's a huge regulatory risk here. So these companies are going down the paths with all this distraction, spending all this money on this merger. And then if it's going to get blocked, it's going to be a total waste and then what. And I think I remember reading, I could be wrong here, but I think I remember reading somewhere that there is not a large breakup fee associated with the deal because there was in the past, and that was one of the reasons why the government was against the deal because they were like, well, clearly you think there's a lot of risk here because you have this huge break up fee. And I believe there's not this time. And so essentially, the value of that breakup fee is what is supposed to guard against this from a shareholder perspective. And if there is no break up fee, then like you're assuming a lot of risk to the deal, not getting done because of regulatory issues. I could be completely wrong on all this, but I think that might be what's going on. All right, like that hypothesis. And to put some numbers behind it, T-Mobile's share price went from $64 before it was announced down to 56 and Sprints went from the high, high value of $6.50 down to $5.10. So what matters there is the market cap. So current market caps of both companies are $47 billion for T-Mobile and $20 billion for Sprint. But that doesn't include the debt either. Right. Which is massive. Like we should also say, it's worth touching on for these companies. I did a little math earlier. Sprints total current liabilities in long-term debt is $42 billion and T-Mobile's is $24 billion. Oh, wow. So T-Mobile's much better capitalized with what do you see there? So what market cap is like 40 something? 47.7. Okay, so 47 billion dollar market cap equity value versus 20 something billion debt for Sprint is probably what like one less more debt than equity, right? Yes. Yeah. So there you have it. Well, do you tech themes? Yeah, let's do it. One of them is how much 5G is talked about in the reason for this combination. And it's something that's completely, it's not locked. And it's not fully known what is going to be necessary. And it's talked about for a business reason for this to happen long before it's going to be fully built out and available for customers. And like we've just seen this before with with 3G with LTE like it was it was this like nebulous unclear thing until it wasn't and there was like always a three or four year period where there was business hype around it. And reasons why certain carriers were going to be in a better position that other carriers sort of before it was actually a thing. And it's just like I've been trying to tamp my expectations around what 5G is going to be so far just because I feel like I've seen this movie before. On the other hand though, like yeah, I agree like there's so much hype as overblown all this stuff. Think about our data networks now versus like 2008 or 2010 or 2012. Like I don't really think about our care when I go off Wi-Fi on my phone and I can still do everything. That was not the case back then. At least in the US that was not the case. My main tech name is I was trying to think about like what is up with this industry and these businesses and like people don't pay a lot of attention to it. It's super boring. Hopefully you guys found the episode interesting. We had fun researching at least. But like why does Masha care so much about this? And like I mean he's as we talked about on the soft thank episode. Like most of his whole career has been in these types of phone wireless businesses or you know hard asset utility like cash flow businesses. And then you know telling the stories here of the McCaw family and the Stan Gillespie's and like how successful they were as entrepreneurs and how much money they made. What's up with these businesses? And I think that we're kind of brought back to me and made me think about is like they are stable cash flow businesses. Like these are Warren Buffett style businesses. Meaning that yes there is existential risk to them over like the multi decade long period where like broadcasting went to cable went to wireless like there is transition that happens. But during those periods you have customers locked into paying you like 100 to 150 dollars a month. And you know like customers by customers we mean like basically every person in America or in the world or whatever geography you're in. Like that's a lot of money with very predictable stable cash flows and you can use that to just create enormous businesses. And so I think about like how can you apply that to the internet and internet business models. And some of our investments that we're making right now at Wave is a form of a subscription type business even has marketplace aspects. But subscription business is I'm kind of coming around on like how powerful they can be like this is what Netflix is. This is what you know Amazon Prime is this like if you know like how much money your customers are going to give you and there's low-churn you know in perpetuity you can architect really amazing businesses around them and use it to do lots of things. So subscription businesses perhaps still yet underrated to generalize that to something we've talked about more on the show and really specifically the soft bank episode stable and predictable cash flows you can do amazing amazing things when you have that in your business. Yep. Yep. Well, that's you know you're preaching to the Warren Buffett choir there. Anything else on tech themes? Not that we haven't already touched. Yeah. All right, greeting. What are we greeting now? Are we greeting this deal if it goes through? It's we're greeting this deal if it goes through for shareholders of what is it current shareholders of AT&T. So God, current shareholders of T-Mobile. I think we have to do it for both though because it's a stock deal. It's a merger like this. Yeah. But it's a digital telecom and soft bank and public shareholders here all have a stake in the upside of risk here. Is there more value when all the dust settles than then existed before by combining if it goes through? Yeah. I got to say 100% right? Like if it goes through now look is this going to create a trillion dollars in value like you know next did or you know Instagram maybe will or something like that? No, if this goes through and goes through the regulators like 100% is a great idea and it is going to enable these companies to compete with AT&T and Verizon in a way that they couldn't before. That's where I come down. I can't this maybe the first one where it's like just it feels silly to actually kind of arbitrarily pick a pseudo like a grade because it would be a pseudo high but high high variance grade. But like you know I completely agree. I think this is the right move for for all shareholders to do this. Number one has to clear regulation and then it's an execution challenge from there to do it well. It really is a merger it's not like there's a winner and a loser it's like everybody's in the same boat all together. Right. Right. We decided shares that this new thing are a better idea than each of us have being shares in our own thing. Yeah. Yeah. I don't know what does that make it to make it in a I mean I don't know I guess it yeah it breaks our scales. Yeah. It's in the multiverse. It's in a different different physical dimension. What I'd like to do at some point is chart all these like what the x axis being episode in the y axis being a b c d f and then like have error bars like for the variance that that we wish to assign each of those but that would be cool. I don't know like b plus a minus with high variance hard to yeah that actually be really cool. Any question is if you want to do a created an acquired data visualization on that would be awesome. We'll put it on the site. That we absolutely would. Yeah, my question is like is this the right time to do this? Like is should it politically like should they have waited for a different administration? I mean the issue is if you decide to wait two years and three years or whatever and roll the dice is the market so sufficiently different like the time kind of has to be now and the question is. Well, I think this administration is probably going to be the most favorable to something like this. Yeah. Certainly more so than a democratic administration than a Democrat administration. Yeah, I don't know. We still live in a democracy despite that we're going to be next. This is where we should cut to the next section. Yeah, let's just go to the next. Okay, that sounds good to me. Carvots. Yeah, there was an awesome podcast episode with Andrew Chen of Andrew, the amazing growth marketer who formerly was growth at Uber and now is a general partner at Andrews and Horowitz as of about a month ago. He was on Intercom's podcast and Intercom has a great podcast on growth and Andrew is kind of the foremost thinker on this and was there at the early days of what is growth hacking and helping to define it and figure out that in a large organization you can have a growth team that really sits between product and marketing that is really thinking about what are intrinsic things we could do to the product that would make us acquire users better and cheaper and have that viral growth rather than going and spending on advertising. He talks a lot about strategies at Dropbox where that was done. The thing people always think about is that get free space by getting someone to sign up but how so much more of it actually came from being able to share folders because that was an intrinsic tweak to the product that made it more inherently viral and then sites a bunch of different other examples of similar things and what he looks for in B2B companies being able to leverage sort of consumer style network effects both within and outside of companies. The big overarching point that he's making is that growth marketing is really about frontier technology and being a person who learns how to harness a frontier technology before it all turns into crap and eventually all acquisition channels turn into crap and how fast can you figure out what the new frontier tech is and harness that to be able to create something that spreads virally on that that fits a person's need in a really perfect way and it's just a really good, it's not long, it's like a half hour something but really good framing. Anybody who's listening to this podcast really doesn't care about long episodes anyway but it's a really good framing of what is growth marketing, what should I be looking for in trying to create the next product that decros like wildfire and what technologies and platforms do I need to be paying attention to now because none of the old tricks will work anymore and that's the way it's always been. It's just a matter of the cycle of one new trick shift to old. Yeah, that's actually a really good point. It is like a law of nature like all all acquisition channels turn into crap at some decay rate. We talk like Spotify growing on the back of the Facebook network or whatever, what have you Instagram growing on Twitter. It's ultimately an exploit that's novel at first and then people get sick of whatever you're doing to them. Yeah, they're gonna be growing on Craigslist. I think about the scooter companies and the bike companies growing on having your thing on the sidewalk. Yeah, he points that out. They ask him what's your favorite onboarding tactic recently and he was like non-software ones. The onboarding tactic of one seeing green bikes everywhere and two seeing people having fun on them every time I pass them. That's the best onboarding ever. Yeah, it's great, but it's not gonna work forever. At a certain point, there's gonna be so much crap on the sidewalk that cities are gonna just slated out or people are just not gonna care anymore. Sidewalks are gonna look like my app screen, like my home screen. Yeah, remember, home screen real estate was like a good tactic for a while and then people will like no more apps on my home screen. All right, Mike Carbout, also a podcast, a whole podcast series, not an episode, a podcast itself. The 996 podcast. This is great. So it's done by Sarzaang and Hans Tong at GGV Capital, which is a really, really great VC firm and investor, both in the US and China. They do cross-border, US and China and are in some of the largest Chinese internet companies early and great companies here in the US. Anyway, this podcast, 996 and they also have a newsletter is by far the best that I have ever seen take on English language, take an explanation of what is going on in tech and China. And so if you care about tech today, you've got to care about China, whether you operate in China or not, there's just so much innovation over there. A certain point in the last year, I feel like the pace and leadership of tech innovation shifted from Silicon Valley to China, or at least it's on par. This is a great podcast for understanding what's going on, they've great guests and I can't recommend it enough. I listen to the first episode this morning on your recommendation and excited to dig into more. The first episode's with Jerry Yang. Jerry Yang. So to the extent where you're like, how did that Alibaba deal go down and what was the thinking there and how did that logistically work to have that relationship in China and work with the government and work with it? It's a really cool story. Yeah, yeah. Really cool. And then they have one of the co-founders to show me and talk about all the bike sharing companies and highly recommend. If you like our show, I think you will like theirs equally. Well, I think that's what we got. I think that's it. If this is your first time listening to an episode and you liked it, you should totally subscribe from your favorite podcast client. And we would love a review and that can happen wherever you choose and that is all we have for you. Thanks to the telecom industry for providing a century of insane deals going down to give us the fodder for this research. Oh, yeah. Without thanks to the telecom industry for providing Amazon. And Rover and Madonna and the acquired podcast. So there you go. There we go. All right. Later.