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Opponents to T-Mobile/Sprint merger step up efforts to block deal

May 3, 2019

 

 

Their core arguments against the combination of T-Mobile and Sprint remain much the same, but opponents to the tie-up are stepping up their lobbying efforts in meetings with Federal Communications Commission staff and commissioners.

 

Members of the 4Competition Coalition met this past week with FCC Commissioners Brendan Carr, Michael O’Rielly and Geoffrey Starks, as well as advisers to Chairman Ajit Pai and other FCC officials, to reiterate their opposition to the proposed merger. The 4Competition Coalition consists of Dish Network, AFL-CIO, Common Cause, Rural Wireless Association and more than a dozen other entities.

Their meetings come as several Wall Street analysts have lowered the odds that the deal will go through. Raymond James analyst Ric Prentiss, for example, now puts the probability of approvalat 55% versus a previous 80%. Analysts at New Street Research, at last check, believed the deal is unlikely to get approved as currently structured, and were looking for conditions offered by one side or the other.

 

The opponents say that if allowed to proceed, the merger would lead to price increases for virtually all wireless customers, substantially raise wholesale rates and cause significant job losses, all while failing to deliver on promises to expand rural coverage.

They also seized on Sprint executives’ comments about the status of its network and pointed to Chief Commercial Officer Brandon Dow’s testimony to the California Public Utilities Commission in February, with statements like: “Sprint will be here to compete whether we merge with T-Mobile or not,” and “[We] are a stable company. Sprint is not going bankrupt.”

Sprint is in a tenuous position in that it needs to show it’s in dire straights without the merger, but it also needs to operate in business-as-usual mode until a deal is done. That means it must continue with its plans to deploy 5G all the while telling regulators (PDF) that it’s “in a very difficult situation that is only getting worse.”  

 

While some Wall Street analysts have pointed out that T-Mobile will do just fine without Sprint—as opposed to what will happen to Sprint if it doesn’t merge—the stakes are high financially for the executives involved. According to Bloomberg, T-Mobile CEO John Legere stands to gain a payout of roughly $44 million, but if T-Mobile outperforms more than half or all its peers over a period, he’ll pocket up to twice as many shares. 

Opponents have other concerns as well. If allowed to merge, the combined company would exceed the FCC’s spectrum screen in 532 cellular market areas, or 1,996 of the nation’s 3,221 counties, covering all of the top 100 markets. The transaction would also lead to a dramatic increase in the Herfindahl-Hirschman Index (HHI)—451 points from its already “highly concentrated” value of 2,814 to 3,265.

In testimony before a House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law in March, Legere promised the merger will be job positive from Day One—with about 3,600 new hires needed in its first year—and that the combination will close coverage gaps in rural areas to reach 95.8% of the estimated 62 million rural residents with broadband access.

He also reiterated that the New T-Mobile will make available the same or better rate plans as those offered by T-Mobile or Sprint for three years following the merger.

With companies reporting first-quarter results over the past week or so, Legere took the opportunity Thursday to argue for the merger in a new blog post. “The New T-Mobile will finally have the scale and financial resources to be that disruptive rival that the U.S. market so badly needs,” he said. “We’ll be bigger and even more aggressive in our fight to eliminate consumer pain points. We have a plan to compete toe-to-toe with established leaders and the new entrants to drive competition and innovation, bringing more choice and lower prices to all consumers,”

 

Besides the FCC, the U.S. Department of Justice is reviewing the deal. In an appearance on CNBC on Monday, U.S. Assistant Attorney General Makan Delrahim did not give any indication which way he and his team might fall on the matter. “I have not made up my mind,” he said. “The investigation continues,” and the DoJ was waiting for more information from the companies.

 

 

Source: https://www.fiercewireless.com/wireless/opponents-to-t-mobile-sprint-merger-step-up-efforts-to-block-deal

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