Rosenworcel Stance May Provide Small Opening for SoftBank Buy of T-Mobile
SoftBank may have at least an opening at the FCC if it moves forward on a buy of T-Mobile US. While FCC Chairman Tom Wheeler and the Justice Department have been negative on the deal, Democratic Commissioner Jessica Rosenworcel is officially taking a wait-and-see approach. Rosenworcel “doesn’t prejudge transactions before they are even announced,” a spokesman for the commissioner said Thursday.
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Both the DOJ and the FCC have signaled deep concerns about SoftBank’s possible buy of T-Mobile to merge the company with Sprint (CD Feb 6 p1). Wheeler raised a red flag the same day he met with SoftBank CEO Masayoshi Son (CD Feb 4 p13). Meanwhile, Son if anything appears to be energized by Comcast’s proposed buy of Time Warner Cable and the implication that similar big deals remain possible, industry officials say. “There’s this theory that the Comcast/Time Warner thing gives everybody else cover,” a government official said.
"It’s certainly possible that reports about Commissioner Rosenworcel’s views could be enough for SoftBank to decide to join the merger party,” said Paul Gallant, analyst at Guggenheim Partners. “But there are still procedural uncertainties that wouldn’t make FCC approval a slam dunk. And DOJ still seems pretty skeptical. So at this point it still feels to me like the companies would be fighting uphill to get it done in Washington.”
"SoftBank is behaving as if it has a strong case to make,” said Andrew Schwartzman, senior counselor at Georgetown University Law Center’s Institute for Public Representation. “Mr. Son surely realizes the odds are against him, but it sure looks like he wants to go ahead,” he said.
A former FCC spectrum official who doesn’t represent wireless clients said a SoftBank/T-Mobile deal is unlikely to be approved. “The chairman’s office really controls review of transactions,” the former official said. “Commissioners are low down the list in terms of chairman consideration when it comes to reviewing transactions. They're on the back end. It really is a chairman issue.” Also, other big deals before the commission wouldn’t “substantially reduce competition within an industry that is seen as seen to be more competitive,” a concern with SoftBank/T-Mobile, the lawyer said. “The tea leaves are still not good if you're a supporter of that potential merger.”
No merger before the FCC is likely to be easy to complete, BTIG analyst Walter Piecyk said in a Wednesday research note. “Communications companies can be assured that Free Press and other public advocate groups will pretty much oppose any large transaction within an hour of it being announced and those organizations have clearly improved in their ability to quickly rally their base of supporters,” he said. But at the same time, Piecyk wrote, the FCC’s growing tendency to regulate through merger gives Son a “carrot” to offer the commission. “Sprint might be wise to proactively promise to adhere to elements of the FCC’s broadband net neutrality if they elect to proceed with a deal with T-Mobile,” Piecyk said.
Comcast/Time Warner would have a combined $196 billion market capitalization at current stock prices, compared with $63 billion for Sprint/T-Mobile. SoftBank’s market cap is $81.7 billion.