Virtual operator talks up deal with new host network Verizon but migration will hit full year EBITDA
US MVNO Ting Mobile has announced plans to switch to the Verizon network from T-Mobile due to uncertainty caused by the latter’s protracted bid to merge with Sprint.
The $26 billion deal is still waiting for the nod from regulators, as the two telcos negotiate concessions that will ease concerns about the tie-up’s impact on competition. Sprint and T-Mobile hope to secure approval by 29 July.
It seems that Ting Mobile was hoping for an earlier conclusion.
"We had expected the proposed Sprint/T-Mobile merger would have been resolved by now. Had that happened, we would have been able to engage with the parties and assess the financial implications of potential post-merger relationships," explained Elliot Noss, CEO of Ting’s parent Tucows, a US Internet services provider.
He explained in an investor call this week that the merger created "challenges and uncertainty" regarding carrier relationships and they have since become problems that require addressing.
Indeed, Ting runs on both the Sprint and T-Mobile networks, but "because the merger has not occurred, we had to assess our relationships with Sprint and T-Mobile separately," Noss said.
As a result, following separate negotiations Ting has extended for 12 months its deal with Sprint, but opted to end its relationship with T-Mobile, and switch these customers onto the Verizon network instead.
"While this was a difficult decision, we believe that we will be moving to a much better network in Verizon, with better economics, better guarantees and a better strategic relationship, all of which sets the stage for stronger long-term prospects for our mobile business," Noss said. "We also believe we have insulated ourselves, to the greatest extent possible, from the risks associated with the pending Sprint/T-Mobile merger."
Ting’s network migration has forced Tucows to lower its full-year EBITDA guidance to $52 million from $62 million. The company expects to spend $3 million this year, and up to $12 million this year to switch customers onto the new network.
"These variable costs are mostly in the nature of the marketing costs needed to move customers from one network to the other, and will mostly be in the form of inducements, device subsidies and/or a form of service credit," Noss said.
"We recognise that migrating a large MVNO customer base will be complicated and expensive, but, in the long term, we believe these carrier changes are in our best interests under the present circumstances," he added.