T-Mobile, Sprint Make FCC Filing as Fight Against Deal Starts
T-Mobile buying Sprint is important to overall wireless industry competition and good for consumers, said their 678-page public interest statement posted by the FCC Tuesday, as expected (see 1806180044). The transaction is now formally before the FCC. The two promise the new T-Mobile will spend $40 billion to combine their networks into a “robust, nationwide world-class 5G network.” CEO John Legere blogged the new company is poised to take on cable and Dish Network, not just other wireless carriers. Early indications are the deal will face some of the same opposition at the FCC that greeted AT&T’s failed buy of T-Mobile.
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The filing is likely to change few minds, Craig Moffett of MoffettNathanson told us. “It is full of interesting data, but unfortunately, it’s not very rich with new arguments,” he said. “It’s hard to find anything in the document that will likely persuade anyone to change the opinion they’ve already formed.”
New Street Research said it’s not changing its earlier calculation the deal is more likely to be rejected than approved (see 1804300055). “Politics has the potential to be a bigger driver of the outcome than anti-trust analysis,” the firm wrote investors: T-Mobile “is making the right arguments, and they are well-made, but it remains to be seen whether they sway the administration, and we may not know the administration’s reaction until late in the process.”
“This proposed merger is necessary to accomplish a goal critical to enhancing consumer welfare in this country: the rapid and widespread deployment of 5G networks in a market structure that spurs rivals to invest in a huge increase in capacity, and, correspondingly, to drop tremendously the price of data per gigabyte,” the carriers argue in docket 18-197. “This transaction is a unique opportunity to deliver myriad compelling benefits for American consumers, which would not be achievable in the absence of the merger.”
Combined, the companies will have to spend less to deliver data and be able to better compete with Verizon and AT&T. Prices will fall for consumers, they said: The new T-Mobile network will “provoke competitive responses from Verizon and AT&T that result in as much as a 55 percent decrease in price per GB and a 120 percent increase in cellular data supply for all wireless customers.” Expect fiber-like speeds from wireless, they said.
Rural America will get improved service, the combining companies said. They said the deal will help with the Trump administration focus on job creation. “New T-Mobile will hire employees to build the new network; extend the Un-carrier customer care model to a wider subscriber base; and support customers in growing segments like in-home broadband, enterprise, and IoT,” they said.
Legere laid out the competitive case. “T-Mobile’s 5G network will be broad -- though not deep, except in select markets,” he blogged. “Sprint’s 5G network will be deep in some markets, but not broad. And we believe that no one else -- not Verizon, not AT&T, not Dish, not Comcast, not Charter -- will have the breadth AND depth we can bring together with Sprint.”
Public Interest Fight
Self-described public interest groups are girding for a fight.
"The basic problem is that going from four to three competitors in an already-concentrated market results in such a loss of competition that they face an extremely high burden in showing some countervailing consumer or public interest benefit,” said John Bergmayer, senior counsel at Public Knowledge. The statement doesn’t “adequately explain” how purported efficiencies lead to consumer savings, he said. “Even taking their technical claims about 5G, cellsites and spectrum at face value, they do not adequately explain why a merger specifically is the only way forward."
"These companies can engage in all of the Orwellian double-speak they like, but it doesn't mean that less competition is actually more competition,” said Matt Wood, Free Press policy director. "Their claims that the merger is necessary to spur 5G deployment must come as surprise to investors in the stand-alone T-Mobile and Sprint, who have been told all along that both companies had aggressive 5G deployment plans already in motion before this deal was exhumed yet again.” Public Knowledge and Free Press were among leaders of the fight against AT&T's failed attempt to buy T-Mobile seven years ago.
T-Mobile and Sprint are the biggest members of the Competitive Carriers Association and President Steve Berry emailed CCA is carefully reviewing the application. “It is certainly a positive that T-Mobile has expressed commitment to partnering with competitive carriers to help deploy 5G services,” Berry said. CCA is “particularly focused” on some parts of the proposed transaction, including “reasonable roaming agreements, access to spectrum, handset and device availability, and other infrastructure, backhaul and USF considerations,” he said.
The deal “makes good sense and should get past antitrust and FCC review successfully,” said Larry Downes, senior fellow at the Georgetown Center for Business and Public Policy. “Sprint has no realistic hope of thriving, let alone getting to 5G. Allowing the merger doesn’t so much remove a nationwide competitor as it adds one that doesn’t currently exist.”
Free State Foundation President Randolph May said regulators shouldn’t focus on the move from four to three national carriers. The FCC “shouldn’t begin with any preconceived notions about market power and market definition,” May said. “It is unlikely the relevant market for analyzing the merger's competitive impact is a bygone legacy ‘wireless’ market as opposed to a multi-platform ‘broadband' market.”