Season 2, Episode 8: T-Mobile / Sprint

0:00 The reinvention of John. Ledger. Of John Ledger. Welcome to Season 2, Episode 8 of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert, I'm David Rosenthal, and we are your hosts.

0:29 Today we'll be diving into the recently announced or should I say, proposed but not regulator approved Sprint T-Mobile merger. David, you're laughing. Uh I'm laughing. Who who knows what's uh What's real these days. This may be yet another episode where we cover an acquisition much like the Broadcom Qualcomm merger. Um that did not actually happen. And so only time will tell, but now seems like a really fun time to to dive into the topic, hear the crazy stories of both of these companies dating back

1:04 over a century and dig into the genesis of where um 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, but are we going from four carriers to three or from two carriers to three? Uh well We'll have to wait for that.

1:29 Uh but it's funny, in in our last episode in the PowerPoint episode, we were, you know, joking that they're like uh in the nineteen eighties there were like eleven people who worked in technology. Uh and who who knew that there actually was a related industry that had even fewer people working in it. It turns out that telecom and the wireless industry in the eighties and nineties had like six people working in it. And As you alluded to, Ben, almost all of them were in Bellevue, Washington. It's true.

1:58 Well, listeners, if this is your first episode and you like it, or if this is your fiftieth episode and you've been with us for a long time, we would love a review on Apple Podcasts. uh really appreciate any any time you you could give to uh uh doing that. It helps us promote the show, to get great guests and to uh justify the increasing amount of research that David and I seem to be uh obsessing over episode by episode. If you are new to the show, you can check out our Slack at acquire.fm. Uh join the thirteen hundred of us that uh are talking about any tech news really, but big big mergers, acquisitions, IPOs, uh uh major landmark events that are happening between big corporate entities. All right listeners. Now is a great time to talk about a new partner of ours here on Acquired, Lagora.

2:43 The agentic operating system that is redefining how the world's best legal teams work. Yep. It's sort of obvious that AI is gonna completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Legora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do. operate with obsessive customer focus. They embedded inside a massive law firm.

3:15 For months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review where you Drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legor's bet here is interesting, since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time. And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

4:03 And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Ligora numbers essentially speak for themselves. When they have a head to head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries. And crazily, they went from one million To a hundred million in ARR. In about

4:31 Eighteen months. Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at Lagora.com/slash acquired.

4:54 And just tell'em that Ben and David sent you. All right, without any further ado David, do you want to dive into the history and facts of these uh behemoth concocted merged, unmerged, and twisted companies. Well how long do you have then? Yeah, listeners, we're only a couple minutes in right now, but uh You know the uh the final episode of length. We don't. Uh I suspect it ends up being long. Well, let's see. Let's see how fast we can get through this.

5:26 Well Like so many of our stories on this show, this one, the story of The modern wireless telecom industry, uh and how it came to be. Starts also in Silicon Valley.

5:39 On the Stanford Campus. Unlike many of the other stories though, it doesn't stay there for long. So let's go back to nineteen sixty nine.

5:49 On the Stanford Campus. And there's an undergrad. There, named Craig McCaw. And Craig is from a

5:57 Fairly wealthy uh family in Washington State. his father, Elroy McAw, uh has been a successful entrepreneur in radio and television broadcasting. kinda throughout the Northwest and uh 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, um, which was just emerging the late sixties, early seventies, and then would obviously grow throughout the eighties, nineties, two thousands. But unfortunately.

6:29 tragedy strikes uh very, very sadly. And Craig loses his father, Elroy dies suddenly of a stroke in in nineteen sixty nine, while Craig is he's the oldest of of four brothers and he's still an undergrad. At Stanford. Way too early to to lose one's father, uh for all the all the children. But Elroy passes away. And it turns out that the company, uh, even though the family, you know, was very successful, the company was very successful, they had a lot of debt.

6:54 on the company, as many of these types of broadcasting companies do. And it wasn't structured very well. And they had to when 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.

7:37 And so Craig, he's the oldest of brothers. He's he's still an undergrad at Stanford. I think this is the next year, probably nineteen seventy. Uh he's he's a senior. While he's a senior during while going to school, he takes over running the company to do something and kinda turn the family's fortunes around. And slowly, and he he focuses on the cable business. And slowly he builds it into a kind of major cable empire over the next ten to fifteen years. And so by the

8:05 early to mid nineteen eighties, uh the company was then called Macaw Cable Vision. It was the twentieth largest cable pay TV provider in all the United States. Um very successful and Craig's running it and he's still very young. And then something else happens in the early eighties The advent of wireless cellular phone technology, analog cell phone technology is invented. And to make these calls work, uh, this is the days like people s envision this being used as car phones, uh, for like wealthy businessmen. To make the technology work, though, you need to have wireless spectrum. rights to operate the 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.

8:52 they end up landing on holding a lottery. So they literally they they hold a lottery. You have you you file an application to win the right to a spectrum license in a given city or geography. And then they they hold a lottery to see who wins it. It's certainly fair, David. It's it's fair in in some sense. And uh and Craig, you know, finds out about this. It's much discussed, and he sort of sees the parallels between the growing cable industry that he's been a part of over the last ten years. And what the cell phone wireless industry

9:26 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. Um he wins some of them. And others there are lots of like plumbers that are applying and accountants like just random people like are applying to win these spectrum licenses. Reminds me of the uh dot com grab. It's like a dot com domain name, uh grab. Except there are far fewer spectrum licenses than there are dot com names out there. After the the lotteries are held, Craig then goes out and he buys a lot of the licenses from the winners and ends up with

10:01 basically a a giant amount of real estate of uh of of spectrum real estate um throughout the country. He says, Okay, well I'm gonna 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. McCaw cellular.

10:21 Uh and he's kind of first to the game before any you know, before ATT, before what was then MCI, uh Sprint, all of the large wired telephone landline carriers get into the business. McCaw Cellular is uh is the biggest cell cell phone business out there, or cellular network business. And David, in looking into this, the company Lynn Broadcasting comes up. Do you know how that fits in here? Lynn broadcasting, um, I 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 T V channels, separate channels and then sell sell business. So McCaw had had gotten also back into

11:13 the TV broadcasting business that that his father was in. And so they acquired Lynn Broadcasting, which is a major broadcaster, owned a whole bunch of local TV stations throughout the US. It's a big purchase and it was I think heavily debt financed to to make it happen. Three point four billion dollar purchase. And I believe that Lynn operated or maybe still operates a bunch of the local T V stations in New York City. Um so they were one of the biggest uh local broadcasters. uh in the country.

11:40 There's a great New York Times piece from nineteen ninety called Craig McCaw's 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 uh newspapers before they were digital and then present them as digital articles in the archives the same way you'd be reading any other um web based New York Times article and they actually show you Here's the place in the New York Times business section where this occurred and they highlighted it. Said it's super cool that 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 uh you know a cellular telephone network, and they say Essentially, Craig McCaw is betting that the public will want cellular phones. Today about one point five percent of the population uses car phones or portable phones. The hope is that figure will rise to fourteen percent in just a decade.

12:33 This was nineteen ninety. Nineteen ninety. Oh my gosh. Fourteen percent. I would assume it had to be higher than fourteen percent by two thousand. I mean we hadn't seen like I had a cell phone in two thousand. Yeah, it was in high school.

12:47 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 Yeah, I think it's a lot of it. My parents were lawyers and They had car phones in there. Car 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 cellphones. Just like they didn't see smartphones that it would all become

13:19 Yeah, totally crazy. So I should have mentioned earlier, uh I don't think I did. As all this was happening, McCaw in in the beginning days, McCaw graduated from Stanford undergrad and then moved back up to Washington and and ended up settling in Bellevue. And that's why Bellevue, Washington, uh 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.

13:44 So Nineteen eighty six. comes along and the cellular business is Growing so much. that McCaw ends up selling off the cable business entirely for seven hundred and ninety million dollars in nineteen eighty six.

13:57 So fifteen just seventeen years later, after you know Complete the family being completely destitute, they sell off the cable business for seven hundred ninety million dollars in nineteen eighty six. That's pretty good. They focus solely on the cellular business. Keep growing that over the next couple of years.

14:15 And then four years after Ben that article that you read in the New York Times in nineteen ninety four. They end up selling the whole company, the seller business, to ATT, the old legacy telephone company. For twelve point six billion dollars. Again, this is nineteen ninety four. That's a lot of money. The company gets renamed ATT Wireless. It becomes ATT's wireless division that

14:38 data barely existed before then. Which is just crazy. Ultimately About ten years later in in the early two thousands and two thousand four, ATT Wireless merges with a company called Singular. Uh of course remember Singular, as I'm sure many many listeners do here in the US. The company keeps the ATT Wireless name. and moves to singular headquarters, which are in Dallas, Texas. Uh, and so that's why ATT is in Dallas instead of in Bellevue now. But the core of it uh all came from Bellevue.

15:06 Nineteen ninety four Macaw Cellular Trivia Fact. David, what else from the acquired episodes that we have done uh uh was related to Macaw cellular and happened in nineteen ninety four. Oh my gosh. That's a tough question. I should know this, of course. It was a a a gentleman who is angel investing. Oh yes, of course. Of course. How could we forget so instrumental to Everything about acquired. Tom Malberg.

15:34 Tom Alberg. So Tom was an executive at Macaw Cellular. and uh uh was was doing a lot with cellular data and that was the reason he was introduced to Jeff Bezos when Tom started to do some angel investing uh because the internet sounded uh 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. Like literally Amazon comes out of this. Yeah. I mean Bezos would have been successful, uh I'm sure. Regardless. But uh but certainly Madrona uh and Thus Acquired um is a direct offshoot of all of this.

16:16 Tom, of course, being, you know, uh one of the one of the founders of Madrona uh a few years later. So back to Craig and McCaw after this transaction, I mean Craig is now one of the wealthiest people in the world up there at this point in time with with Bill Gates, you know, also in the Seattle area. But he's not done. He's still quite young. He's not done and he's not done with the telecom industry. The sale to ATT was all in stock. So Craig is now one of the largest shareholders of ATT. This you know, huge, you know. hundred year long, you know, 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 a stake, uh an equity stake in a company called Nextel.

17:03 I suspect many listeners remember from the uh late nineties, early two thousands days, the Next Hell Direct Connect. Walkie talkie on your cellphone. Oh yeah. Craig gets involved in Next Hel starts buying up shares. Uh by nineteen ninety five, just a year later, he is uh controls the majority of the equity in the company as the controlling shareholder. Uh, Nextel was not doing very well at this point in time.

17:25 He completely turns them around, you know, they end up introducing Direct Connect. They become grow hugely become much larger. They end up then he sells Uh Nextel in his second transaction to an old legacy telephone company, In two thousand five, ten years later, to Sprint. He sells Nextel for thirty five billion dollars. Sprint becomes Sprint next hell. And that is the core of Sprints.

17:49 wireless business. Uh so thus From One guy from Craig McCaw comes both ATT and Sprint that we know and probably don't love today. Yeah, but David, that transaction happens in two thousand five. I was gonna do your transition for you. Something happens a year before

18:07 Two thousand five. In two thousand four, 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 the Steve Jobs of telecom, really. One more thing. In two thousand four, he starts a company called ClearWire. And Craig is starting to see Yeah. I don't know that he necessarily sees smartphones coming in the iPhone, but he does see that data over cellular telephone networks is going to be a big thing. Smartphones exist. There's Palm, there's, you know, Microsoft uh Windows Mobile or whatever. they called it back in the day, BlackBerry, all those things. Uh so he founds ClearWire. And ClearWire is essentially a a wireless company, but instead of focusing on voice, it focuses on data. So they end up doing in in November two thousand eight, they do a huge deal with Sprint, uh, who just a couple years earlier Craig had sold Nextel to

19:00 And a sprint buys half of the company And ClearWire essentially becomes the data part of Sprint's network, uh what would become their LTE network. Uh at the time it was using a technology called WiMAX, which We're not even gonna go down that rabbit hole in in the interest of time and our sanity. Yeah, it is it is worth noting for listeners, we're already in alphabet soup of sort of companies and companies that are acronyms um and mergers and acquisitions and spin outs. we're covering like 10% of of the sort of the depth of what happens here in these corporate histories. Uh we're gonna sort of touch lightly on ATT's breakup by the Department of Justice and the Babybells and all that, but the amount of company smashing and reassembling from different pieces over literally a century here.

19:48 We just don't have time in the episode to do it all. It's like a particle accelerator. They're literally these companies are smashing at high speeds into one another. That's how I picture it too. But one one uh I've I've two small um 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 uh ClearWire. Uh has not started any any further uh telecom companies. But he does pretty well through all this. He he currently holds the record for the most expensive car ever purchased in 2012 at an auction he bought in 1962, Ferrari 250 GTO. for over thirty eight million. Lest you think all of this is just boring telecom stuff.

20:32 There is a lot of money to be made in these industries. Uh and we should we should say too, in addition to to thirty eight million dollar, you know, historic sports cars, the McCaw family is also one of the most incredibly philanthropic uh uh families, you know, McCaw Hall in Seattle. tons and tons of charitable organizations. I think much like Bill Gates, their legacy as a family will actually they'll be remembered more for their philanthropic efforts than for the incredible industrial uh the value they created in in industry. Basically every arts organization in Seattle has the McCaw family to thank for um For their patronage and um As as well as so many other organizations in Seattle and

21:13 Throughout the country and the world. Really fun to. listeners may know that I was involved at uh at Madrona in uh in starting a company called Rover dot com. Rover is now a very successful marketplace in many ways. led to lots of great things for um many people in the Seattle tech scene and and for me is a big part of starting Wave and our focus on marketplaces.

21:34 Uh Rover originally was not called. It was originally called A Place for Rover. Place for Rover. It was that is still I bel I believe still the uh the official name, incorporation name of the company I knew I s I I signed the incorporation documents back in the day when we first started it for a place for rover. We We wanted to get the rever dot com domain name. And so we were like this was super early days, we were searching around like okay, like wait, who has it, like doing who is lookups, all this stuff.

22:02 It turned out that the rover.com domain name was owned by Clearwire. Because ClearWire had had a product that they They introduced and then canceled, called. The rover. And this was like a hockey puck sized device that was essentially a Wi Fi hotspot. This was like one of the first Wi Fi hotspots. Uh 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 Rover dot com. They were selling it. They had canceled the product. So this is twenty eleven, summer of two thousand eleven when we're starting Rover.

22:37 Rover the company. And uh 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 Madrona was Brian McAnjues, who was the C had been the CEO of Aquaniv, uh, which was Microsoft's largest acquisition before Skype and then LinkedIn. And Brian was was a partner with us at Vadrona, and he was on the board of ClearWire and and knew Craig McCaw really well and John Stanton, who's gonna come into this story in a minute. Hey, like you're on the board. Can you like you know talk to the company, see if we can buy it from them for you. See if you can get there. We ended up getting the deal done. We bought the we bought the domain name. we actually leased it first and then with an option to buy it and then and then we bought the River.com domain name.

23:29 And and thus one of the world's great marketplaces was born. Out of out of Macau cellular comes Rover. So many things. So many things. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done.

23:54 But in an AI first world, that doesn't hold up anymore. Yep, your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT and And your posture is different than it was last week, let alone at your last audit. Banta's own research found that around seventy percent of companies have this

24:14 quote unquote shadow AI running with no security review at all. Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRSC engineer, that's governance, risk, and compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

24:40 In half. Which is exactly why more than sixteen thousand companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake are. All stay audit ready and catch the risks that crop up between audits across every vendor. Every AI tool. The whole environment.

24:59 And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get$1000 off Vanta at vanta.com slash acquired. That's V-A-N-T-A.com slash acquired for$1,000 off. And just tell them. That Ben and David sent you.

25:26 So listeners, uh I'm gonna guess where David is about to go and There's gonna just start to be a lot of companies involved here. And for folks that uh haven't heard a lot of these companies before, a really helpful thing to do if you're interested is go to the Seattle Times article called T Mobile Sprint Deal would extend Northwest Long Wireless Rain uh 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, um 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, could be sort of helpful in visualizing. Um it's certainly helpful as we sit here uh doing research to um to keep ourselves straight. Indeed. Indeed. So to pick back up the story.

26:14 And again, we we apologize for all these companies. Hopefully the the graphic will help keep it um keep it straight and and we'll try and be we'll try and be as straightforward as possible here. I would argue the second best spin out and 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. Uh It turns out when they were starting the cellular division of Macaw, there were two other people who were pretty instrumental in that besides Craig McCall. One was a guy named John Stanton. And John was uh then a recent graduate from Harvard Business School.

26:52 And he became the first employee on the cellular side of the company. And he eventually became the COO of Macaw Cellular. And the other the other person that that uh ended up being instrumental what came next, uh was Teresa Gillespie. Terry she goes by Terry, Terry Gillespie. Uh she was an S V P at McCaw and was the the company's controller. She had been a a public accountant before that. The two of them, they do Two important things. One, they get married. That's uh I I don't know which they would say is more important than that. The other thing they they do is they start T Mobile. Uh i it wasn't, of course, called T Mobile. Not directly. Um but T Mobile, the T Mobile we know and love that we are talking about in this episode, John Lazare, the uncarrier.

27:34 Uh it is it's John and Terry who uh who started that. T Mobile USA. T Mobile USA, yes, not uh not Deutsche Telekom. But we'll get into all that. Okay, we're going back to the late eighties, early nineties. John and Terry. I don't I don't know if they were married yet, but they're they're at McCall Cellular. Terry's on the finance side. Uh John is the COO of the the cellular business. And and John had joined in uh nineteen eighty two And the spin out we're about to to talk about uh happened in in nineteen ninety four. So a good twelve year span of of being there at at McCaw for uh Actu uh actually ninety two it started D There are too many companies to keep stra keep track of. Um but leading up to nineteen ninety two and the couple years before, uh John started realizing so the focus of McCaw was

28:18 Urban You know, if the 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. Um these were not like out in the countryside. So there were all these spectrum licenses that you know my call owned some of them, but a lot of them were just ignored out in rural America. And John kinda had the vision that, like, hey, this might this wireless thing, it might become like an even bigger industry someday, and maybe everybody'll use this. And so he had started buying up

28:50 these licenses, these spectrum licenses in rural parts of the country, uh starting in in rural Washington, I believe. He decided to leave McCaw seller. Again, this is like an enormous company. Like people thought he was crazy at the time, like uh he and Terry. Uh, career suicide to go from like the leading wireless company in the world. to you know working in in the boonies essentially. They 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 nineteen ninety two acquiring another regional cellular company called General Cellular Corporation. They team up with Hellman and Friedman, the big private equity firm based in San Francisco, to co purchase it. And then a couple years later, then in nineteen ninety-four, they merge Pacific Northwest Cellular and General Cellular into a company they call it Western Wireless.

29:41 At this point in time, they're offering service to nineteen Western states under the brand cellular one. I don't know if that rings any bells for anyone. Cellular one telephone. uh 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 service uh VoiceTream, VoiceTream Wireless. Uh a couple years later, nineteen ninety-six, they take the company public. Then a couple years after that, nineteen ninety nine, VoiceDream, the urban, the city focused uh service has actually been growing a lot. They spin that off into a separate public company. In nineteen ninety nine.

30:16 Two years later. Two thousand one. Deutsche Telekom. comes in, the big German telephone company wired and wireless operator, and they buy VoiceStream for thirty five Yeah.

30:27 and rename it T Mobile USA. And thus that is how T Mobile is born. And think about this. Like this is you know, again, just to recap. McCaw Cellular is is sold in what was it, nineteen ninety ninety four for twelve point six billion.

30:43 So you know, a lot of money. Not that much longer, two thousand one, so what's that, seven years later, uh, the protege at McCaw, you know, John Stanton and his and his and his wife Terry They have created uh this crazy thing, this rural operator Turn it into voice stream. They sell that for thirty five billion dollars.

31:02 Two. They actually retain Western Wireless, the cellular one, the rural company. That guns ends up getting acquired a couple years later by Altel. For six billion dollars. I'll tell you.

31:15 ends up getting split up and getting acquired by mostly by Verizon, uh small parts of it by ATT, and is a big part of the Verizon network now. So like we now have complete coverage. We now have John Stanton's starting Western Wireless, selling to Alltell, which becomes parts of Verizon. We have Macaw Cellular itself uh getting what became ATT Wireless. Next L becoming sprint. Next hell becoming sprint. Um and then lastly voice stream becoming T Mobile. We have

31:47 one more uh uh event here, one more merger yet to cover that will be the 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 uh I mean all this Backstory is um 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 and Terry, they do continue in the wireless industry. They start a company called Trilogy, which had owned many international wireless assets.

32:16 And then these days it's mostly they've turned it into a a venture investing firm um based in Seattle. They also own the Seattle Mariners today. They do. They do. Incredible. And they are uh supportive and amazing investors in in PSL and some of our companies too. Yep. Um So it all comes all comes back home. Okay, let's fast forward a little bit. The industry basically operates at steady state, you know, from our point of view, there are like fifty-seven mergers that uh and acquisition that happen that we're not even like I can't even keep track of all of them. But basically, this is the state of play. You have A T T.

32:50 And Verizon, which are the two largest carriers in the US. You have uh Sprint, uh, which was Next L Um is the third largest and then you have the new T Mobile. Formally voice stream, uh owned by Deutsche Telekom, that is the fourth largest carrier in the US at this point. And sort of uh uh 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 s to steal share uh pretty much exclusively from oh. Not yet. From Sprint, but way to that. They're stealing they're stealing um some share, they're doing some stuff, but but actually uh it's kinda sad. I mean they're owned by this like super conservative German and German telecom company.

33:29 you know, the first decade really. from the voice stream acquisition, uh through the first decade of T Mobile USA is like Mm. It's like okay. But We fast forward.

33:43 March. Two thousand eleven. A T T. announces a deal that they're gonna buy T-Mobile USA. Deutsche Telekom's like, all right, you know, this hasn't worked out. Quite as we thought, uh, we didn't become the dominant carrier in the US. Let's cut our losses. Um, they're gonna sell

33:58 T Mobile. To ATT for thirty nine billion. So four billion more than they paid for it in two thousand one. But at least they're gonna get out of the game, cut their losses. And and this is gonna reunite essentially the McCaw and Stanton And Gillespie branches of the you know, Bellevue Seattle Telecom Empires. It's all gonna be reunited under one uh one company. Uh it's gonna be by far the largest wirel wireless carrier in the US.

34:23 And that was its downfall because the US government and the antitrust regulators were like, Nope. 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 Bell Labs and everything great that came out of that. No. The government says no. It doesn't actually end up getting rejected by they they don't go so far as to actually um block the deal, but the companies realize it's not gonna happen, they call off the merger. Yeah, they they indicate that it would be a bad idea for you guys to stop doing the paperwork. Yeah. Yeah, good idea to stop doing the paperwork. Yeah. So December twenty eleven, the uh T Mobile and uh ATT call off the merger. And T Mobile is like in a serious bind now. So the deal fell through. Their distant fourth place behind Sprint would end like way, way behind AT Verizon.

35:12 The company is like flat lines. It basically Things suck. Morale is terrible. So two thousand twelve, this was December twenty eleven, they call off the merger. Two thousand twelve, 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. 'Cause remember, coverage is super important. At this point, national coverage is really important. People use their smartphones.

35:38 We're in the smartphone era. Everywhere all the time they travel if you're You only get data in your home city and not when you're traveling. That sucks. And and I think Metro PCS unlock uh new addressable market for them in terms of like market segment, because it was the pay as you go, it was the sort of lower cost carrier, they could get their infrastructure and coverage and then also sort of a new uh a new segment of people that were able to use the broader merged infrastructure also. Yep, yep, totally. And we're not even gonna get I'm I'm not gonna go anywhere near cellular standards. We talked about that on the Qualcomm Broadcom episode.

36:14 Yeah, listeners, if you care, you can go somewhere else. It's important technically, but but we're not even gonna go there. Okay. Metro PCS was a public company. As a result of the merger, the Metro PCS shareholders owned twenty six percent of the combined entity. So Deutsche Telecom now owns uh what's that, 74% of the company. And then twenty six percent 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, you know, this disastrous uh falling through of the merger. And they find really boring, nonpolarizing run of the mill CEO. Yes. Yes, that was the plan. So they bring on Uh, a turnaround expert, a guy who has just sold a company called Global Crossing. We're not gonna get into Global Crossing. It's like

37:03 the most boring wired telecom conference bridge corporate telecom company you can imagine. The former the CEO of it had taken over to turn around the company from bankruptcy, ended up uh selling it leading it to an acquisition, a three billion dollar acquisition the year before in twenty eleven. So like great, this guy turned them around, he saved it, you know, went from zero to three billion. Hopefully we can do the same. Let's bring him on and see what he can do here. This is a guy who before Global crossing, he had been an executive in the telecom industry at ATT for almost twenty 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

37:41 relatively early days of smartphone time, you know, twenty twelve, twenty thirteen, whatever um Great, let's bring him in. Uh what's his name again? His name is John John Ledger. You know, whatever. Some dude. Telekom guy.

37:54 He's got cool hair. He's got he's got long hair. He didn't used to have long hair, but then after I don't know if he had that at the time. No, he didn't I mean he was like a telecom CEO. He had like sort of like totally buttoned up. Uh but then after they the he led to the exit of um 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, don't telecom. You know, again, big German corporate conservative company think they're getting like the turnaround CEO here. So John starts uh as CEO in the fall of twenty twelve of T Mobile. And what is the first thing he does? He he's from the telecom industry, but he doesn't know a lot about wireless. He's from the wired, corporate wired side of things. Um so he's like, Well, I'm gonna learn about what customers

38:37 Think about this company. I'm gonna start listening into customer service calls. Like literally people calling to complain about their, you know. Self-okay. So he spends the first couple of months doing this and he's just like aghast. He's like, Oh my God. This is unf I've 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 Well, What have I gotten myself into.

39:09 A couple months go by, he's doing this. It's January twenty thirteen at CES in Las Vegas, and C S is Um, you know, in in the U there's Mobile World Congress in Barcelona internationally, but in the US C S is typically at this point in time at least where cell phone wo both, you know, Android manufacturers and um Uh, 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 uh

39:36 at C S in Vegas twenty thirteen. So he goes, they know they're all scheduled, all the T Mobile execs are there. They've got this whole thing. It's you know, you know, it's a keynote. And uh it's the night before at the hotel suite and John's there and he's talking with the execs uh the other senior execs and it's like what should I wear? What should I wear at this uh Keynote now. To be fair, this is how the story is told today. Who knows what the reality is? Uh but uh just like what should I wear?

40:02 And uh 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 riffing on that. And uh 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 uh and let's see if let's go out and let's see if we can get uh a t shirt made overnight to put the T Mobile logo on this hot pink t shirt. I'll wear that under my seat. 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 his sleeves rolled up, he's got a Yankees hat on.

40:41 Uh, and he's got a massive silver chain around his neck and a bunch of like braid bracelets on his wrist, and like uh until he shows up. We'll link to video of this uh for the keydo in the show notes. It's just amazing. So there all these other T Mobile like senior execs, you know, they're in their like super button up suits. Bunch of them are European, 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 fifty cent. Like what's that? Like how do you do fellow children? Exactly. It's amazing. So um There's literally this moment. Uh again, we'll 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

41:30 I don't know. Like there are articles about this afterwards. Apparently he goes off script and makes all this up on the spot. Whether this was all planned We don't know. Uh but the story is Wh 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. Uh so he goes off script. And he just starts like during He just starts like Talking about his experience of

41:54 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 ATT. And he like takes all these shots at ATT, calls their network crap. He says there's more truth in online profiles on online dating sites than ATT has on their network maps. Like it's just crazy. And like Remember, this is the telecom industry. People go nuts. People are like, We haven't seen anything this interesting in decades. And uh it gets all this press. And people like, wow, T Mobile, Mavericks, they're breaking the rules. Like uh and ledger Totally embraces it. He basically goes like full on performance art over the next couple of years. Um, he gets on Twitter, he starts like, you know

42:40 And Instagram. There's like his Instagram's kind of amazing to follow. Aside from his like uh ATT lambasting There's like, you know, every Sunday he's like, here's me grocery shopping and cooking with the fam. Like he it's like an intensely personal Yep. He does a live show, a Facebook live show every Sunday. Uh 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. Uh he does selfies all the time, he like curses all the time. So there were uh lots of people, I'm sure, have been wondering sort of how do you pronounce the guy's name? Is it Laguerre, 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 in ATT is about to jump off the ledger. His whole persona now is Like

43:27 We know you hate ATT and Verizon and like we are your other answer. And I'm just gonna be so obnoxious about that. They they rebrand T Mobile as the uncarrier because they're unlike every any other carrier out there. Legend he's like getting into fights on Twitter with Donald Trump. Like it's amazing. He has so he has five point seven million Twitter followers now. Randall Stevenson, who's the CEO of ATT, has a hundred and twenty three Twitter followers and has never tweeted. And you look at Randall Stevenson and he's like the telecom exec you would expect. And now there's all this like controversy. Apparently they like colluded with the Trump administration and Michael Cohen and all this stuff. It's just like ridiculous. And all this time ledgers just like F you guys shouting from the rooftops. The

44:09 strategy about 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. I mean it's it's really become kind of the Elon Musk, Steve Jobs, like cult of personality. Uh 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. Well it's a complete it's like of architected strategy at this point. And Letter actually talks about it in an interview. Uh 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. Uh I mean it's basically like he does the Donald Trump playbook. Declare victory. Even though you're obviously like winning at nothing. You just declare victory and then you designate an enemy. Then you attack that enemy and

45:01 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 twenty thirteen. The company has nineteen straight quarters of adding over a million subscribers, net new subscribers. It quickles sprint to become the third largest carrier. They're basically like there's this giant like vacuum happen in the industry where like subscribers, mostly from Sprint, as you were saying, Ben, but also from ATT and Verizon are just like getting sucked into 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 the leaders ATT and Verizon in order to get it 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're they have all this cool zero rating stuff where Netflix doesn't count against my my plan. There's a bunch of plans that have unlimited data that were like way before the ATT and Verizon ones. A lot of the ways that ATT and Verizon plans have gotten better over the last few years.

46:10 are because T Mobile has pushed the envelope and forced their hand. Honestly, all the credit in the world goes to the US government here. Because this is why they blocked ATT buying T Mobile because they're like this would have preventing competition. What does T Mobile do? They start like competing incredibly fiercely and it's Great for consumers. I mean, Five years ago, like Yeah.

46:31 Sucked. Like, of course, people hated their cell phone plants. It was so, so crappy. And it's still not good, but it's like way better than it used to be. Um 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 r like meaningfully steal share from um Verizon and ATT, they did end up making those customers' lives better. By existing and forcing the hands. Yep. Totally.

46:57 All right listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is uh no longer the hard part. Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like the risks

47:25 Are real. Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why Service Now built the AI control tower. Yep, AI control tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with Any AI, not just theirs. Every device on your network, every permission across every system.

47:50 Every AI agent visible and secure in one place. And ServiceNow can do this because they've spent more than twenty years building the operational backbone of the enterprise, the workflows, governance, approval, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security. ServiceNow already runs more than a hundred billion workflows annually and trillions of transactions for more than eighty five percent of the Fortune five hundred. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates. And in a future, that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is Who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out service now.com slash acquired and tell them that Ben and David sent you.

48:46 Okay. One more piece. And then we're gonna wrap it up. is that right around the same time that T Mobile is transforming itself and Ledger is is joining. Uh this is late two thousand twelve, early two thousand thirteen.

48:59 There emerges another figure. in the industry here. One we've talked about in this season. And uh quite a force unto himself. That is

49:08 Masayoshi san and So think. So this is prevision fund. This is SoftBank itself and Massa through the company. Remember, Softbank is the largest mobile carrier in Japan and has investments all around the world in uh 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 you know, it always has been. It's the broadcasting and cable and telephone and 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 seventy eight percent of sprint.

49:46 uh in July twenty thirteen for twenty one point six. Uh billion. And the best part about this this bidding war with Dish is that Softbank makes the offer to to acquire Sprint. Dish Network then announced a higher offer to acquire or sprint nextel at that point, which they then decide to retract. So that they can focus on buying None other than ClearWire.

50:09 Which they also retract, and then ClearWire gets bought by uh Sprint as well. The drama is just too much. I can't handle all the drama. I thought telecom was gonna be the most boring thing. There's so much drama. It's boring. I think it's boring because like I just can't handle this drama. Like it's too much. One quick aside because we would be remiss to cover all this without covering this fun bit of history. Sprint w back before Nextel, uh when it acquired, you know Craig McCaw's second act. And um

50:37 and became the wireless company. Sprint was a landline telephone operator. They were third behind, I believe third behind ATT, of course, and the bells being one, and then MCI and then and then Sprint. Sprint the landline company started as the Brown Telephone Company in eighteen ninety nine, in Abilene, Kansas, eventually became the Southern Pacific Communications Corporation. They didn't like that name. They decided they need a new name. So they run an internal naming contest.

51:05 And so th 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. Like when you think about like that, like uh American history, like the South Pacific Rail, you know, the or the or uh formally known as the Southern Pacific Transportation Company, they actually th 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 uh an ability to communicate along those lines for you and you know for your company to operate. And so 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. And so they had this internal communication network that in the early seventies they decided after this this ExecuNet2 decision

51:58 they could actually decide, hey, we'll we'll lay fiber optic cables because we own that land, we have that right of way, or at least the 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 to other people, which really circumvented the ATT's monopoly on public telephony and offered this other option as you're a it's a B to B company. Like, hey, you corporation, do you want to use this private line that we run between cities that we bury to wire next to our railroad? Like thinking about that infrastructure is completely nuts. It's totally nuts. Well so Do you wanna finish the story about the naming contest? I would I would love to finish the story. This is like one of my favorite facts.

52:37 And I've mentioned it to uh friends and some listeners of the show, like I can't believe this is a thing. Sprint. While a cool word is actually an acronym. And the the contest that David was referring to, the the uh naming contest for what would be better than Southern, you know, SPC or the the Southern Pacific Communications company, is Sprint, the Southern Pacific Railroad internal network communications. Internal network telecommunications. Telecommunications. Yes. Gotta get the T in there.

53:10 Unreal. Well, that's where spring comes from. Okay. Back to Softbank. And Masiya Shizan.

53:17 They win master. likes to win, as we have um seen on this show and uh in all of our daily lives. Masa wins. Not only does he win acquiring a majority of sprint, But As been alluded to dish Focused instead on clear wire.

53:35 He beats Dish at ClearWire too. Sprint ends up acquiring ClearWire as well. Uh it already owned fifty percent. They own the rest of it. Dish walks away empty handed. Okay, so all this happens in twenty thirteen. But then over the next couple of years, Sprint is like a punching bag. Like literally T Mobile and and John Ledger, even though they're focusing, you know, he's focusing his tweets on ATT, they're just like literally delivering body blows to Sprint and like Sprint Uh

54:01 that point in time was bigger than T Mobile. Now they are way smaller. T Mobile is just taking basically all of their customers. Masa, of course, is is not oblivious to this. Late. twenty thirteen, early twenty fourteen, news comes out that um and I I think this was probably Massa's plan all along, was use 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 uh Sprint and Massa are working on a plan to acquire T Mobile and merge the two companies. And what year is this David? This is

54:30 Not now. This is uh twenty thirteen, late twenty thirteen, early twenty fourteen. Once again, regulators just like they did with ATT and uh and Team Mobile the first time were like, I don't know about that. You might not want to do that. So they abandoned the deal. Which is interesting because they were not the first player, not the second player. Like they you know, they I think they were three and four then, maybe three and five. Three and four, but sprint was three. Uh and T Mobile was four at this point in time. But remember Sprint They know. Sucked.

55:00 Uh they they were not uh uh doing what T Mobile is doing now, which we'll get into uh in discussion. They work on the deal, they they abandoned it. Sprint's like, Okay, we gotta be cool too. Uh we gotta be, you know, an uncarrier. What can we do? They're looking around. They're like, Oh, we're gonna make an investment in a really hip Cool new company. I was hoping you found this gonna be my best part of the whole episode. We're gonna be so cool. Oh, January twenty seventeen, they buy a thirty three percent Minarti steak in

55:32 The hottest The hottest Streaming music company around. Oh.

55:43 Uh Jay Z. Um Yeah.

55:48 It doesn't work out so well. So wait, David, do do do they still they still own thirty three percent of title, right? It does. It does it really? Yep. I think they do. I don't know.

56:02 'Cause like presumably if this goes through, then like T Mobile owns some of Title. I would love to see title with you know T Mobile. Anyway.

56:15 Clearly that doesn't work. So now that was January twenty seventeen. By mid twenty seventeen, Southbank and Massa are just like literally f you know Fist palming. Uh maybe fist maybe literally bathing themselves in the head like this is not working. Sprint sucks. How are we gonna, you know, rationalize all this? Like, okay, if we can't acquire T Mobile, maybe we'll sell Sprint. to you. By the way, uh as an aside, yeah, you can you can stream J Lo featuring DJ Collid uh and Cardi B right now on title. Oh that actually sounds definitely list for that. Cardi B is awesome, by the way. Okay. So Softbank, they're trying to sell he's like I'm gonna sell Sprint

56:56 to Deutsche Telecom to the parent company there who you know still owns seventy some odd percent of of T Mobile. This is great. I'm gonna sell sprint to Deutsche Telecom. They can't agree on price to get the deal done. Finally now, uh a couple weeks ago, April twenty ninth, twenty eighteen, they take a new tack. Clearly

57:13 John Ledger. You know the the boring turnaround CEO like He's won. He's like the man. Yeah.

57:21 We just gotta have him. Do this. T Mobile. And uh sprint. are going to they've announced that they're going to merge directly. So

57:29 Whereas before it was Sprint was gonna buy T Mobile, then it was Southbank was gonna sell Sprint to Deutsche Telecom. Again, leaving T Mobile kinda you know, they would get merged but all but like nope. T Mobile wins. Uh T Mobile is going to It's gonna be based in Bellevue. John Ledger is gonna remain the CEO. I mean they are essentially taking over Sprint. Deutsche Telecom will have a forty-two percent stake in the combined company, SoftBank will have a twenty-seven percent stake, the rest will be publicly traded, Massa will be on the board.

57:59 Uh, I love that it's like build as a merger when it's nine point seven five sprint shares for every one T Mobile share. No. Well I mean this shares the'cause the share price I mean that that that share counts don't matter, but like clearly T Mobile is is Taking over the company here. the enterprise value of the deal. Uh so this includes debt in addition to the equity uh values sprint at 59 billion. And a hundred and forty six billion for the combined company, so eighty seven billion for

58:26 T Mobile. Phew. 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 gonna happen? This is the third time that two of the four major US telecom uh wireless carriers have tried to merge.

58:40 Yeah. Government. blocked it the first time with ATT and T Mobile, and then where it's going to the second time when Sprint was gonna buy T Mobile. Why is it gonna be different? This time. Is the question.

58:52 It was these exact companies and their exact market positions. But it was a different administration. Different administration. Sure. Uh it was a different administration. I mean T Mobile is a majority foreign owned company. So you have a majority foreign owned company all basically buying. Right, buying an another majority for 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 an or a foreign subsidiary buying another foreign subsidiary. So at least that's not going to set off the alarm bells that, you know, an American company being owned by um an uh someone overseas that that sort of transaction would set off. the the company is very confident that the this thing is gonna happen and they've released lots and lots of materials. It's actually pretty hilarious if you go and look at um their T Mobile's investor relations site. Like the press release

59:45 is completely over the top. Like for folks who've written 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 Also Our shareholders should be happy because there's economies of scale. And you're like, wait, wait, wait, wait, wait, wait, wait. Those things how wait, say again how this is gonna create jobs while you're you know deduplicating a lot of your infrastructure. So like it's it's almost to the point where like they're they're selling so hard that this is good for everyone in America, no matter what position. that you're in, uh, that they may even open themselves to like the the the risk of people being like, Wait, what? This makes no sense to the Well and the headline of the press release. The headline is T Mobile and Sprint two combined.

1:00:35 Accelerating five G innovation. Okay. And increasing competition. Wait what? You're literally taking two competitors and you're merging them and then you're saying that's gonna increase Competition.

1:00:47 Actually, I mean I think Right come out on this. Why is Why would it be different this time? I I actually think that is the kernel of it, which is that The last time it was Sprint which Exactly.

1:00:57 buying T Mobile. So it's like okay, you're gonna go from You know. three sucky and one sort of and now some an interesting uh consumer option to uh just three sucky ones. Now you're going from three sucky and one like I know oh. Really interesting to A bigger really interesting one. So I think the thesis is like now we can compete

1:01:17 head on with ATT and Verizon with our uncarrier strategy. Yes. I don't know. So I buy your logic, here is the explanation uh 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 gonna be the only five G 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 it w before the merger there were four companies. It'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.

1:02:11 I think that they're arguing that it's like um to our point earlier in the show that all of these businesses are related, that it's like Comcast and it's um, you know, Dish Network and Well, direct T V is part of A T T now, so y they can't claim that. But it's that there's gonna be a convergence between television companies and satellite companies and Wireless carriers. I I I don't know.

1:02:34 I mean they're probably right. where I net out isn't a similar place to where you net out that like this th th there's is so much cost associated with building and maintaining the infrastructure necessary to be a wireless quote unquote telephone provider uh these days that you need to be of a sufficient scale in order to do that, and neither T Mobile nor 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, uh T Mobile may have sold past the close. Uh on the other hand, though, I mean like you need to sell hard because um

1:03:10 Obviously the The government blocked it. Um But it was a different administration. Um But It is actually f so I I I wanna say a couple more quick things. So

1:03:21 So there is a website. You can go to allfor5g.com. They've actually set up a public facing website of v of that's basically a PR campaign to 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.tmobile.com creating a robust competition in the 5G era. It's a slide deck that violates all the rules of uh 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 uh flamboyant about how great they are. So like the 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 you actually kind of lose the narrative a little bit in in how many advantages this is gonna have for everyone in the world. There's a slide with there's a slide that has two different the left side says amazing innovation and it has the logos of Uber, Lyft, Instagram, Snapchat, Tinder, and Venmo. And on the right, it has uh

1:04:27 Uh uh the headline's 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 it's a really fun slide deck to go and look at. And Department of Justice is why you should approve this merger. Yeah. Yeah. Well. Alright, anyway, that's our section on on risk to why the deal may not get done.

1:04:52 Yeah. Uh um 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 I on the surface and half after spending four or five hours looking into this, I I I'm for it, but Like I think it's gonna be good for if you take the lens of good for competition, good for going from two to three people as customers. I'm I'm I'm in on that argument. Yep.

1:05:17 Yeah. Yeah, I think I am too. But um Well, Category? Well, actually I want to say one thing before moving out of that's actually more of the acquisition history and facts. It's interesting to note that

1:05:31 the wireless industry was growing massively from the time when Softbank bought Sprint until today. And Softbank Bot Sprint. They bought seventy percent For what was it, twenty one billion dollars. Uh seventy eight percent. Yep, twenty one point six. Seventy eight percent.

1:05:50 And and today, you know, the the enterprise value, or I'm sorry, the the the market cap, or not today, but at the day that it was announced was twenty six point five billion in I think Softbank lost money. Yeah. T Mobile has been taking all of the growth. Like Uh for a number of years T Mobile was growing at more than a hundred percent of the industry, meaning it's a All of the growth of the industry was

1:06:18 Uh going to T Mobile. I mean, 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 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 ba it's the same business.

1:06:44 line that they have, so it's really You know, it it's I think it's it's it's just consolidation to realize economies of scale. Yes, a hundred percent. And the one thing that we haven't touched on yet is there actually is kind of a synergy here where and Oh man, I we need like a buzzer. Like how many episodes have we made it since I last said Synergy? I hope a lot. Uh, but there actually is something that makes a lot of sense here, and that's that the unfinalized 5G network spectrum.

1:07:11 There's a lot of sort of things that may be 5G. So when people are talking about five G, 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 all the technical things here, but basically People believe that the 5G network is going to require a lot more antennas. So it's gonna be a very expensive build out. You're gonna see in some of sort of all over cities, um, that it's going to require a much higher I believe it's a much higher wavelength. Let me look this up real quick.

1:07:44 a much higher frequency spectrum. So T Mobile has lots of spectrum in the 600 megahertz range where they operate now. Um you're gonna need a a much higher frequency uh spectrum in order to deploy the 5G networks. Guess who has that from the clear wire acquisition? It's Sprint. So sprint actually Has Craig McCall. That's right, the spectrum that is likely needed for uh what 5G will be. Well, they have no money, like 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 like an amazing cash position, is is in a much better place than Sprint is to actually build out the network that that needs to happen to run the the sort of next generation technology. So imagine VR over 5G and these super high bandwidth things.

1:08:38 So th there is something that make lots of sense of, hey, you guys sprint have this asset, but lots of debt. Uh, 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 uh Comcast and the like our competitors in this world because like

1:08:59 Come five G, are you still gonna have a wired Internet connection into your home. Probably not, right? It's just more comedian. Like why would you do this is is it gonna go the way of the landline, right? Like if all of the you know, video, content, television And faster internet is just why why would you run a wire into your home and have a thing just you know have your have your wireless devices, right? Like who needs Wi Fi if

1:09:23 You get Um It depends the speed, man. I love my love my gigabit connection. Oh totally, right, but what if you get that over wireless? Yeah. And that's the thing. I don't I don't know enough about five G of what that will look like yet. Um yeah, me neither. Or or how far away it is.

1:09:39 Um. Um. Yeah, totally consolidation, uh for the business line. I I'm scared of what would have happened otherwise. There's just too much here. It doesn't. This is something I wanna sort of ask you and pick your your investor brain on.

1:10:01 After the mur after the the deal was announced, both companies share prices dropped dramatically. Like no neither company's shareholders like this deal. Mm. And so y you know that It's interesting that they can announce

1:10:17 a merger that's going to have a certain enterprise value that val that that places a a value on sprint at uh you know that's based on their current market cap, their market cap has dropped. And a a as they are working the deal out. So sort of how does that work? What happens? What does it signal about the the shareholders of those companies? does it mean that they shouldn't do the deal or that they can't do the deal'cause there's not enough I d I don't know. I wonder if it's actually

1:10:43 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 it's a stock deal, a combination, and since both companies share price drops, I wonder if the the thesis that investors have is like uh there's a huge regulatory risk here. So these companies are going down the path with all this distraction, spending all this money on this merger, and then if it's gonna get blocked, it's gonna be a total waste and then like and then what? And I think I remember reading I 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 Yeah, government was uh against the deal because they were like, Well, clearly you think there's a lot of risk here because you have this huge breakup fee. And I I believe there's not this time. And so essentially the the value of that breakup fee is what is supposed to guard against this from a shareholder perspective. And if there is no breakup fee, then like you're assuming a lot of risk to the deal not getting done because of regulatory issues. I I could be completely wrong on all this, but I think that might be what's going on.

1:11:44 I like that hypothesis. And to put some numbers behind it, uh T Mobile's share price went from sixty four dollars before it was announced down to fifty six, and sprints went from the uh high high value of six dollars and fifty cents down to uh uh five dollars and ten cents. So You know, what mar what matters there is the market caps. So current market caps of both companies are are forty seven billion dollars for T Mobile and uh um twenty billion dollars for for sprint. But

1:12:13 Um but that doesn't include the debt for either. Right. Which is which is massive. Like we should we should also say like so it's it's worth touching on for these companies. I did a little math earlier. Sprint's uh total current liabilities and long term debt is forty two billion and T Mobile's is twenty four billion. Oh wow, so T Mobile's much better capitalized with uh what did you say their market cap is? Like forty something? Uh forty seven point seven. Uh billion dollar market cap equity value versus twenty something billion in debt. Twenty four sprint is probably what, like one to less m more debt than equity, right? Yes. Yeah, yeah.

1:12:52 So There you have it. Well do you tech themes? Yeah, let's do it.

1:12:58 One of them is how much Five G is talked about in the reason for this combination. And it's something that's completely n it's not locked. And it's not fully necessary and it's

1:13:13 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 where there was business hype around it. um and reasons why certain carriers were gonna be in a better position than other carriers sort of before it was actually a thing. Yeah, it's it's just um Like I've been trying to tamp my expectations around what five G is gonna 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 type is overblown, all this stuff, but like

1:13:53 Think about our data networks now versus like Two thousand eight or two thousand ten or two thousand twelve. Like I don't really think about or care when I go off Wi Fi on my phone and I can still do Every that that was not the case back then.

1:14:08 At least in the US that was not the case. My main tech team 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. Uh we had fun uh researching at least. But like why does Massa care so much about this? And like I mean he's uh as we talked about on the South Bank episode, like Most of his whole thing.

1:14:31 career uh has been in these types of phone uh wireless businesses or you know uh hard asset utility like uh cash flow businesses and then you know, telling the stories here of of the McCaw family and uh the Stanton Gillespie's and like how successful they were as entrepreneurs and how much money they made. What's up with these businesses? And and I think that what 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

1:15:11 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 a hundred to a hundred and fifty dollars a month. And it 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

1:15:38 How can you apply that to the internet and internet business models? Actually one of our investments that we're making right now at Wave is um a form of a subscription type business. Uh uh has marketplace aspects, but subscription businesses, uh I I'm kinda coming around on like how powerful they can be. Like this is what Netflix is. This is what, you know, Amazon Prime is. This is like if you know like how much money your customers are going to give you and there's low turn, you know, in perpetuity, you can architect really amazing businesses around them, um, and use it to do lots of things. So

1:16:11 Subscription businesses. Perhaps still yet underrated. to generalize that to something we've talked about more on the show and 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. Yeah. Well, this that's you know, you're preaching to the the Warren Buffett choir there.

1:16:32 Uh all right, anything else on tech themes? Not that we haven't already touched. Yeah. Uh All right. Greeting.

1:16:41 What are we grading here? Are we grading this deal if it goes through? It's w we're grading this deal if it goes through four shareholders of Is it what is it? Current shareholders of ATT. Uh oh God. Current shareholders of T Mobile. I think we have to do it for both though, because it's it's a stock deal. It's a merger. Like the but it's Deutsche Telecom and Softbank and public shareholders here are all

1:17:06 have uh staken the upside at risk here. I is there more value when all the dust settles than than existed before by combining? If it goes through. Yeah. I gotta say a hundred percent, right? Like if it goes through now look, is this gonna create a trillion dollars in value like you know, next did or or you know Instagram maybe will or something like that. Like n no. If this goes through and goes through the regulators, like a hundred percent this is a great idea. Uh and is going to enable these companies to compete uh with ATT and Verizon uh in a way that they couldn't before.

1:17:40 That's where I come down. I can't I this may be 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 I you know, I I I completely agree. I think this is the right move for for all shareholders to do this. Number one, it has to clear regulation, and then it's an execution challenge from there to to do it well. Well, and 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 here. Right. Uh right. We decided shares at this new thing are a better idea than each each of us having shares at our own thing. Yeah. Yeah.

1:18:13 I don't know, what does that make it? Does that make it an A I mean I don't know. I guess it m it yeah. It it breaks our scale is what it does. It breaks our scale. It's in a it's in the multiverse. It's in a different uh different physical dimension. What I'd like to do at some point is chart all these, like with the X axis being episode and the Y axis being A B C D F And then like have error bars like for the variants that that we

1:18:39 wish to assign each of those, but uh that would be cool. I uh I don't know, like B plus A minus with high variance. Yeah. That actually would be really cool. Any any listeners if you want to do a created and acquired data visualization on that, that would be awesome. We'll put it on the site. Yeah, my question is like

1:19:00 Is this the right time to do this? Like is sho i i if politically. Like should they have waited for a different administration? I mean, the issue is if you decide to wait two years and th or 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 gonna be the most favorable to something like this.

1:19:23 Uh certainly more so than a democratic administration. Than a democrat administration. Yeah, I I don't know. We still live in a democracy, despite that we're going to be able to do it. This is this is where we should cut to the next section. Okay. That sounds good to me. Uh Carvelts. Yeah, I there was an awesome podcast episode with uh Andrew Chen of AndrewChen.co, 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. Uh he was on Intercom's podcast and Inter Intercom has a great podcast on on growth, and Andrew is kind of the foremost

1:20:01 thinker on this and was there at the early days of what is growth hacking and helping to define it and and figure out um that in a large organization you can have a 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. um and cheaper and and have sort of that viral growth rather than um going and and spending on advertising. And he talks a lot about sort of strategies at Dropbox where that was done. The thing people always think about is that, you know, get get free space by getting someone to 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 cites 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 h 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

1:21:12 tech is and harness that to be able to uh um create something that 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 or something, but really good framing. Anybody who's listening to this podcast really doesn't care about long long episodes anyway. But it's a really good, uh 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 that grows like wildfire and what technologies and platforms do I need to be paying attention. And that's the way it's always been. It's just a matter of the cycle of when new tricks shift to old. All acquisescent channels. turn into crap uh at some decay rate. You know, we talk like Spotify, you know, growing on the back of the Facebook network.

1:22:02 Or, you know, whatever, what have you. Uh Instagram going on Twitter. Uh It's ultimately an exploit that's like novel at first, and then people get sick of whatever you're doing to them. Airbnb going on Craigslist. Uh, you know, there sir. I think about the scooter companies and the bike companies like growing on having your thing on the sidewalk. Um onboarding tactic recently. And he was like non software ones, like the onboarding tactic of one seeing green bikes everywhere and two seeing people having fun on them every time I pass them. Like 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 legislate it 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 uh real estate was like a good tactic for a while. And then people are like no more apps on my home screen. Alright. Mike Carrot, also a podcast.

1:22:58 podcast series, not a not an episode, a a podcast itself. Uh the nine nine six podcast. This is Great. Uh so it's done by Sarazhang and uh Hans Tung at GGV Capital, uh, which is a really, really great uh V C firm and investor, both in the US and China. They do cross border US and China and the are in some of the largest Chinese internet companies early in and Great companies here in the US. Uh anyway, this podcast, nine nine six, and they also have a newsletter is

1:23:26 by far the best that I have ever seen take on uh English language take an explanation of what is going on in tech in China. And so like if you care about tech today, like you've got to care about China, whether you operate in China or not. Like there's just so much innovation over there. Like A a certain point in the last like really in the last year, I feel like the pace and like leadership of tech innovation shifted from Silicon Valley to China. Or at least it's on par. This is a great podcast, uh for understanding um what's going on. They have great guests. Um

1:23:58 And I can't recommend it enough. I listened to the first episode this morning on uh on your recommendation and uh excited to dig into more. The first episode's with um the you know uh Jerry Yang. So like it to the extent where you're like huh, how did that Alibaba deal go down and what was the thinking there and how did that you know, logistically work to uh have that relationship in China and work with the government and work with it. It's it's a really cool story. Yeah. Yeah. Really cool. And then they have they have one of the companies to Chame and um um

1:24:28 But they talk about all the bike sharing companies and highly recommend if you uh like our our show I think you will like theirs. Um Equally. Well

1:24:37 I think that's what we got. I think that's it. All right listeners. Now is a great time to talk about one of our favorite companies, Statsig. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale.

1:24:58 Yeah. In the crazy speed of today's AI world. Shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers.

1:25:15 And how fast you can use that signal to guide what you ship next. This is where StatsIG comes in. It brings experimentation, feature flags and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. If this is your first time listening to an episode. And you liked it. You should totally subscribe from your favorite podcast client.

1:25:50 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. Uh yeah. Uh Without uh thanks to the telecom industry for providing Amazon. And and Rover and uh and Madrona and uh the acquired podcast. So

1:26:16 There you go. There we go. All right, have a good one, everyone. Later.

What you see above is a preview of the first minutes. One unlock costs 10 credits and covers this episode forever: full segment and word-level timestamps on this page, plus .txt, .srt, .vtt and word-level JSON downloads, as many times as you like.