Opponents Make Closing Arguments at FCC on T-Mobile/Sprint; Sprint Reports Mixed Earnings

Shares of both companies closed up over 7 percent. T-Mobile said it received shareholder approval, through Deutsche Telekom, for the deal.

The coalition of opponents, which also include Public Knowledge, the Rural Wireless Association and Free Press, planned to have filed final arguments individually at the FCC later Wednesday. Replies were due in docket 18-197 that day.

The transaction is anticompetitive “with no countervailing public interest benefits,” Goldman said. The evidence against it is “overwhelming” and there will be “more and more of an outcry,” she said. California regulators don’t plan to make a decision until the second half of next year, “so there’s a lot of time to go,” she said. Other states have OK'd it.

The deal could hurt the U.S. in the race to 5G, said Carri Bennet, RWA general counsel. “A merger only happens when the bottom line of the new company will be improved -- cost savings translate to improved profitability that will be passed on to investors,” she said. “Historically, Sprint and T-Mobile have not built out to rural America and when they do they focus on the county seat and interstate highways.” An analyst said the deal could help 5G (see 1810310015).

“The FCC should deny the proposed transaction because it will be detrimental to the roaming market,” RWA said in its reply. “Applicants’ promise to allow carriers with existing T-Mobile or Sprint roaming agreements to determine which rates will govern their relationship with New T-Mobile does not address RWA’s concerns regarding commercially reasonable roaming rates.”

“I would ignore the noise and I would look for the facts,” said Phillip Berenbroick, Public Knowledge senior policy counsel, on the call. The two carriers keep saying Sprint is “too weak to continue as a stand-alone company,” he said. “Sprint’s argument is largely a warmed-over failing firm argument, but they don’t want to put that name on it. … They sort of make a weakened firm argument."

Q3 Results

Meanwhile, Sprint reported net income of $196 million for Q3, compared with a loss of $48 million a year ago. Operating revenue of $8.43 billion beat expectations. Not all the news was good. Sprint had net losses of 34 million postpaid and 14 million prepaid phone customers in the quarter.

The carrier executives conceded churn is higher than that seen by most competitors -- with postpaid churn of 1.78 percent and prepaid churn of 4.74 percent. “We need to fix churn, we still have a churn which is twice higher than most of our competitors,” CEO Michel Combes said on a Wednesday call with analysts. Combes said the proposed deal with T-Mobile hasn’t helped churn. “With press articles everyday on the merger discussions, that puts a little bit of pressure on our base as well as on new customers” and has affected store traffic “due to consumer confusion,” he said.

The company had a good quarter on small-cell deployments and now has 21,000 in play throughout its network, it said. “We have plowed this area a lot and invested and we’re starting to see good momentum,” said Chief Technology Officer John Saw.

“Subscriber trends were slightly soft, though we feared a worse result after strong trends from the other three carriers this week and last,” New Street’s Jonathan Chaplin said in a research note. “Importantly, the business is showing signs of stabilization. Subscribers are steady and service revenue ticked up slightly on a [year-over-year] basis.”

“T-Mobile gained the bulk of industry net adds while Sprint remained steadfast to improving the quality of its base,” said Macquarie’s Amy Yong. “The likelihood of deal approval is rising. The registration statement is now effective and the deal faces little resistance from the industry.”

FCC Comments

The FCC has posted hundreds of filings in recent days on the deal, most of them short statements for or against.

“In my area, there are very few options for Internet access and we are charged accordingly high rates for what we get,” wrote A. Btngbacl of Blacksburg, Virginia. “I want T-Mobile and Sprint to combine so that they can add to our choices and if nothing else, put competitive pressure to bear on our current Internet provider.”

Former NTIA Administrator John Kneuer, an adviser on the deal, filed several items urging approval. “The attached editorials, and their arguments, articulate the benefits this transaction will bring to consumers around the United States through increased competition, economic growth, 5G technology, and better wireless and broadband services,” Kneuer wrote.

The National Educational Broadband Service Association and the Catholic Technology Network supported approval. Both are concerned about deployment of the 2.5 GHz spectrum controlled by Sprint. “EBS licensees and Sprint have forged public-private partnerships through which Sprint has deployed on 2.5 GHz spectrum to serve millions of consumers while EBS licensees use the spectrum to serve the educational needs of their constituents,” they replied.

Deal Notebook

T-Mobile/Sprint got Alaska's OK. The Regulatory Commission of Alaska voted unanimously to grant T-Mobile’s application and motion for expedited consideration in a Tuesday order in docket U-18-091. The deal is in the public interest and Sprint will remain financially and managerially fit to provide telecom relay service in Alaska after the acquisition, RCA said. Recent OKs also came from the District of Columbia, Maryland and Colorado (see 1810120021).