T-Mobile CEO Mike Sievert discusses earnings, merger with Sprint, and COVID-19

Yahoo Finance's Brian Sozzi spoke with T-Mobile President & CEO Mike Sievert about the company's earnings report, recent Sprint merger, and the effects of COVID-19 on the business.

Video Transcript

BRIAN SOZZI: I'm joined now by T-Mobile President and CEO Mike Sievert. Mike, good to see you.

MIKE SIEVERT: Thanks, Brian, nice to be here.

BRIAN SOZZI: Likewise. So I was on your earnings call. You guys just came out your earnings. On the earnings call, you sounded like a man ready to really get in a fight with pricing. Take us through some of your pricing initiatives.

Do you think there will be a price war out there in the carrier world? Because, listen, a lot consumers, they're out of work and worried about the bills. What are T-Mobile plans?

MIKE SIEVERT: Well, we've always been the low-price provider in this category. You know, AT&T and Verizon, they charge more on average than we do. What's different going forward isn't so much our prices. What's different is how our great value will now be combined with, potentially, the best network.

You know, since the beginning of time in this category, customers have been forced to choose. Do you want the lowest prices? Or do you want the best network? Pick one.

Now, customers with the new T-Mobile are finally going to be able to have both. And you know, AT&T and Verizon, they've been fighting this deal for two years for a reason. They're over there shaking in their boots at the idea that we're going to be able to have a network that's the world's best 5G network. And we're going to combine it with the lowest prices in the industry. And customers are going to be the winners from all that increased competition.

BRIAN SOZZI: Mike, what have you seen in the business of late? I think it was talked about on the earnings call, that things have started to pick back up. Where are you seeing some of those business transform back up?

MIKE SIEVERT: What's different, as we come out of this versus when we went into it, is customers may be more concerned now than ever before about value. You know, let's face it, as we come out of social distancing gradually, the economic circumstances are just clearly different. They're different.

And people have tougher situations and tighter budgets. And as they start to reassess who their provider is in this category, we're so well-positioned because we've always stood up for people with tight budgets. That's always been who we've been. And you know, we're going to be there, ready to serve them with the best rate plans in the industry and an incredible network.

And they're not going to disconnect. You know, that's not what I'm worried about. This is-- this is a category that people rank up there with food and shelter. This is really important stuff. But they may reassess who they're with. And if they do so, we will be there ready to serve them.

BRIAN SOZZI: Have you seen consumers have any trouble paying their phone bill?

MIKE SIEVERT: Yeah, we have. Everybody has. We signaled some increased pressure even in 1Q from that. And we guided that there would be some pressure in Q2 from it. And you know, on the other hand, this is an issue that we've always been well-versed in how to deal with, you know. And that may be different than our competitors, AT&T, and Verizon, and big cable.

You know, again, we've always appealed to people with tight budgets and some tougher circumstances economically. And therefore, it's a core competency in how to help them and how to help them find rate plans that they can afford within our mix and how to help them when tougher times come. So we've been doing that just like we've always done it.

What's different this time, of course, is we did stand up right away and honor the pledge that the FCC asked us to honor, which is not to disconnect anybody until June 30 for failure to pay. Not that we would want to disconnect people anyway but, you know, obviously, that brings incremental cost to us because it removes a variable in the conversation that we would have with people about making some incremental progress as they go along and not letting that bill get stacked up too high.

So we'll see some extra pressure. It will be very short-term in nature followed by what, I think, will be medium-term and beyond opportunity because, as I said, more people are looking for value. We're going to be here standing up for them and providing the best value in the market.

BRIAN SOZZI: Now, the last time I checked in with you guys, 80% of your stores were closed. What's the status on your retail store network? And how are you thinking about reopening these stores?

MIKE SIEVERT: We have started to reopen. We've done it in certain areas. And we've done it carefully. Every place we've reopened, which has been a lot of places, we're opening with more limited hours, in many cases, with curbside delivery instead of in-store delivery. We've activated something we call virtual retail which is the ability for our reps to deal with you remotely and then be able to give you your new phone curbside and other safer techniques.

And so we've had to adopt on the fly. You know, we've had to change from an entirely work-on-premise customer-care model with 17 customer experience centers domestically and move 15,000 customer care reps to their houses. And now 92% of our care reps work from their homes. In the last month, they've taken 4.5 million calls from their homes.

So I'm so proud of the team and how they've adopted and adapted to this situation. But we see incremental progress. Social distancing will ebb. It'll ebb gradually. And as it does, you know, we'll be there ready to serve customers.

BRIAN SOZZI: Has traffic started to come back into some of these stores?

MIKE SIEVERT: Incrementally, yes. And we expect May to be better than April. And we expect June to be better than May. But that is partly because people are starting to get comfortable. They've heard about some of the techniques that we've put in place, and more limited hours, you know, one customer at a time. And it's starting to feel like a safer thing to go do.

You know, this is a really important category to consumers. We were designated right away by the Department of Homeland Security as an essential service so that we could continue operating. And customers, you know, they count on us. They need this connection, maybe now more than ever. Since we can't be physically present with people, we need to be able to be present with them through our technology. So I'm very proud of how our company has stood up and served customers through this period.

BRIAN SOZZI: Mike, I think you really piqued the interest of a lot of folks on Wall Street on the conference call. You noted you see more synergies than you initially thought with the Sprint deal. Now, that was a big number. You called out $43 billion in synergies at the time of the deal. Are you looking at raising that number?

MIKE SIEVERT: Well, you know, we're going to get some more experience before we do that. But you know, five weeks in, we're very optimistic. We may be able to move faster than we expected on retail rationalization, which is a big, you know, potential value unlock for us.

Not from people, by the way, but from leases for stores. We'll still need the people. Network rationalization and moving faster on network-- why? Because we had two years. We didn't expect to have two full years of the pendency of this deal to plan it. You know, that was a gift from our government.

But we had that time. And so now we may be able to move faster than we were planning. Procurement-- that looks like a potential good guy. And also growth rates and Sprint customer churn improvement.

We've been able to move faster than we expected to get roaming, essentially, roaming on all sprint customers. And as they start to experience the broader T-Mobile network with its increased capacity, that's pleasing them. That's making them happy. And we might be able to see some growth in churn benefits from that that are in excess of what we had originally modeled, that and many other areas.

But we're feeling really confident. Our team's feeling very good about-- five weeks in, you know, and in the middle of a global pandemic, but we're feeling good about the potential, medium-term and beyond, after this social distancing starts to ebb.

BRIAN SOZZI: Mike, and, lastly, it wouldn't be a conversation with you without a talk about 5G. Now, you just lit up New York City with 5G. But I'm more interested in what you have cooking on the home broadband front. When will that launch?

MIKE SIEVERT: Home broadband, you know, it's the world's least competitive market. Yeah, those cable guy-- they're good guys. The cable companies are good companies.

But let's face it. They've never seen competition. And we're going to bring it to them like never before. And that's going to-- you know, consumers are going to be the winners from that.

We're going to be able to offer, through 5G, a wireless home broadband signal that's very high-powered and fast but at a lower price than they're traditionally used to paying. And that's going to be a fantastic option for millions of people.

Now, we have to have capacity on the network to do that because home broadband uses a lot more capacity than a wireless connection, you know, smartphone connection. So it's going to take us a little time. We've got to let Neville Ray, our President of Technology, a little bit of time to build the network capacity of this combination.

So it's more of a 2021 and beyond statement than this year. But boy, I can't wait to bring that competition to the cable companies. Consumers are going to be big winners.

BRIAN SOZZI: So you think that this launches next year?

MIKE SIEVERT: Well, we've-- actually, we've launched already in 4G LTE. And we have-- a lot of customers are very happy with it at 4G LTE speeds because it's already fast enough for high-def Netflix today as we sit here. But we haven't been scaling it because scaling it means network capacity. And network capacity is what we're building for in this merger. So little more time before we can bring it to millions of people.

BRIAN SOZZI: All right, let's leave it there. T-Mobile President and CEO, Mike Sievert, first earnings call under your belt. Go get some rest.

MIKE SIEVERT: Thanks a lot.