Dish bought Boost from Sprint/T-Mobile for $1.4B with around 9M customers, but that was also part of a sweetheart deal to get the T-Mobile/Sprint merger approved. $1.35B for 3M customers is basically 3x more expensive, but I think there are some differences.
1. It's not a sweetheart deal. You can't really compare T-Mobile being willing to throw away a billion or two in order to close a deal worth maybe $90B.
2. It's a 61% stock purchase. T-Mobile's stock has been flying high and even if you're bullish on T-Mobile US as a company, it's now worth 14% more than Verizon and 36% more than AT&T. T-Mobile has some advantages in its spectrum portfolio and its 5G lead, but Verizon and AT&T also have a lot of owned fiber that T-Mobile doesn't have and a lead on rural coverage. The point is that I think T-Mobile's stock is likely a bit high and that means that they're partly buying Mint at a discount (by trading slightly over-valued stock instead of cash). Maybe the real value of the deal is only $1-1.1B.
3. It comes with Ryan Reynolds as a spokesperson. Boost didn't come with that.
4. Boost's 9M customers came with the costs of an extensive retail presence. Mint's 3M customers come from a low-touch model that saves a lot of money. T-Mobile is adding 3M customers without adding a large retail cost.
5. This also gives T-Mobile a new go-to-market - the low-touch, store-less go-to-market. That's valuable and they're able to do it with a brand that has gotten traction in that area and without risking their T-Mobile or Metro brands.
6. It's a differentiated offering - specifically offering both limited data plans (which they don't want to emphasize on their T-Mobile or Metro brands) and multi-month or yearly prepaid plans.
7. Mint seems to be a growing brand while Boost was already having problems when T-Mobile was selling it off. T-Mobile sold 9M customers to Dish, but even after Dish bought Republic Wireless, Ting Mobile, and Gen Mobile, they're down to 8M customers. In the video, Reynolds talks about being on T-Mobile's network as a key to their success. It's a bit of puffery, but being on Sprint's network definitely left a lot of Boost customers unhappy and hurt the brand. The point being that buying a brand that has a good reputation and a customer base that seems happy is more valuable than buying a brand that customers aren't happy with that has really high churn.
It does seem a bit expensive, but I'm guessing some of these factors went into the price.
Comments
Dish bought Boost from Sprint/T-Mobile for $1.4B with around 9M customers, but that was also part of a sweetheart deal to get the T-Mobile/Sprint merger approved. $1.35B for 3M customers is basically 3x more expensive, but I think there are some differences.
1. It's not a sweetheart deal. You can't really compare T-Mobile being willing to throw away a billion or two in order to close a deal worth maybe $90B.
2. It's a 61% stock purchase. T-Mobile's stock has been flying high and even if you're bullish on T-Mobile US as a company, it's now worth 14% more than Verizon and 36% more than AT&T. T-Mobile has some advantages in its spectrum portfolio and its 5G lead, but Verizon and AT&T also have a lot of owned fiber that T-Mobile doesn't have and a lead on rural coverage. The point is that I think T-Mobile's stock is likely a bit high and that means that they're partly buying Mint at a discount (by trading slightly over-valued stock instead of cash). Maybe the real value of the deal is only $1-1.1B.
3. It comes with Ryan Reynolds as a spokesperson. Boost didn't come with that.
4. Boost's 9M customers came with the costs of an extensive retail presence. Mint's 3M customers come from a low-touch model that saves a lot of money. T-Mobile is adding 3M customers without adding a large retail cost.
5. This also gives T-Mobile a new go-to-market - the low-touch, store-less go-to-market. That's valuable and they're able to do it with a brand that has gotten traction in that area and without risking their T-Mobile or Metro brands.
6. It's a differentiated offering - specifically offering both limited data plans (which they don't want to emphasize on their T-Mobile or Metro brands) and multi-month or yearly prepaid plans.
7. Mint seems to be a growing brand while Boost was already having problems when T-Mobile was selling it off. T-Mobile sold 9M customers to Dish, but even after Dish bought Republic Wireless, Ting Mobile, and Gen Mobile, they're down to 8M customers. In the video, Reynolds talks about being on T-Mobile's network as a key to their success. It's a bit of puffery, but being on Sprint's network definitely left a lot of Boost customers unhappy and hurt the brand. The point being that buying a brand that has a good reputation and a customer base that seems happy is more valuable than buying a brand that customers aren't happy with that has really high churn.
It does seem a bit expensive, but I'm guessing some of these factors went into the price.