Live From CTIA: Grace Under Pressure

ORLANDO – Dan Hesse, president and CEO of Sprint and the current chairman of CTIA – The Wireless Association, is a smooth talker (i.e., his commercials touting the Number Three U.S. wireless carrier), and he waxed poetic during yesterday’s keynote session kicking off the world’s largest annual wireless-industry gathering.

First, he recognized the Japan’s giant NTT DoCoMo, whose large exhibit space on the show floor was conspicuously empty, manned only by signs on easels asking attendees to text REDCROSS at 90999 to make $10 contributions to the tsunami/earthquake disaster fund. The company, which always brings a huge contingent to the show, made the decision to stay in Japan this year to continue getting its network up and running, and Hesse told the audience that all but 1,000 cellsites covering Japan had been repaired.

Hesse then recited a litany of wireless-industry accomplishments, including:

• America’s re-emergence as the dominant global reason when it comes to mobile data, and that the United States surpassed Japan last year as having the most 3G wireless subscribers;
• More than 50 percent of the cellphones sold this year will be smartphones, and the Android OS owns 29 percent of the marketplace;
• There will be 80 million tablet computers shipped by 2012;
• Wireless data usage will be up 66-fold next year compared with 2008;
• The United States has more 4G deployed than any other country; and
• The long-awaited universal charging devices will be introduced next year.

“The cellphone no longer is a gadget,” Hesse said, citing another vendor. “It’s what IT will become in the enterprise.”

It’s not so much what Hesse said, but how he said it. The man clearly was shell-shocked following the Sunday-afternoon announcement that AT&T will buy T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction currently valued at approximately $39 billion (click here). Most industry insiders thought that the announced “partnership” between Sprint WiMAX affiliate Clearwire and T-Mobile, announced last week would result in a T-Mobile acquisition. (For more on the executive changes last week, click here).  However, no one, including Hesse, saw this stealth deal coming, and it is the talk of the show.

Making hay of the announcement, Jim Cramer, host of CNBC’s “Mad Money,” took the stage to grill three wireless CEOs – AT&T’s Ralph de la Vega, Verizon Wireless’ Dan Mead and Hesse (T-Mobile was conspicuously absent) – on the proposed buyout and other issues of the day. It was clear Hesse (who was on vacation in Florida just prior to the convention and told Cramer he learned of the AT&T/T-Mobile deal just like everyone else did) was uncomfortable sitting with his peers in light of the recent announcement.

Cramer asked de la Vega what was behind AT&T’s buyout (now called “the Sunday event”), getting the answer “the Sunday event was driven by the need for more spectrum, and it will help to stall spectrum exhaustion in major cities first.”

Verizon’s Mead agreed that the wireless industry (and his operation in particular) has been built on acquisition, and it was clear that he wasn’t too concerned about the possibility of being pushed into the Number Two position if and when the deal is approved, which could take a year and a lot of federal scrutiny.

Then Cramer asked Hesse what he thought of the deal.

“My opinion doesn’t matter,” Hesse said. “What matters is what the FCC and the Justice Department think. Consolidation could stifle growth and innovation, and (this deal) puts 79 percent of the U.S. wireless marketshare in the hands of two providers.”

– Debra Baker