Analysts Disagree Whether Odds Improving for T-Mobile/Sprint Approval

The FCC Wireless Bureau sought comment Tuesday on T-Mobile and Sprint’s new econometric study. “Comments should be limited to the new study and not repeat arguments” and are due Dec. 4 in docket 18-197, said a notice. “Absent further significant new record submissions” from the two, it plans to restart the 180-day shot clock for review of the transaction Dec. 4, at day 55.

Oppenheimer now pegs the odds at 90 percent the deal will be approved. “We are growing more confident … that the merger will be approved by regulatory authorities, but with divestitures that could spawn a new, fourth competitor (cable, DISH?),” Oppenheimer wrote investors last week. Wells Fargo’s Jennifer Fritzsche two weeks ago saw a 70 percent chance the deal will be approved, up from 60 percent (see 1810300056).

New Street’s Blair Levin said others are assuming too much if they think T-Mobile/Sprint will agree to a major divestiture. “We agree in principle that if T-Mobile and Sprint were to take actions that would result in Dish or a cable entity being a full powered, facilities based competitor, it would increase the odds of approval to a near certainty,” Levin wrote. “We don’t see why T-Mobile would agree to such an action. As a policy matter, such an action is counter to T-Mobile’s core argument; that the deal is not reducing the number of competitors from 4-3 but rather it is expanding it from 2 to 3.”

T-Mobile could agree to sell spectrum, but why would Dish Network agree to buy it, Levin asked. Dish’s “challenge is not lack of spectrum but the cost of a network build-out,” he said. “A combined T-Mobile/Sprint could help lower the cost of the build-out but why would it want to?”

MoffettNathanson’s Craig Moffett told us the facts on which DOJ will make a decision haven’t changed. “You can make a good case for either approval or rejection, but you can’t make a good case that the fact pattern on which the DOJ will base their decision has materially changed since the deal was announced,” he said. Moffett questioned the logic of spectrum divestitures. “Would one argue that, absent the divestitures, the combined Sprint/T-Mobile would be too powerful?” he asked. “DOJ would simply reject the deal if that were the case. And would one argue that if Dish Network simply had more spectrum that they would suddenly be a viable fourth competitor? Dish already has more spectrum than they know what to do with.”

A condition that requires the companies to support cable operators with a favorable MVNO contract might be “marginally more likely,” Moffett said. “Enforcement of such a condition would require that the DOJ take an active role in overseeing wholesale prices and terms, something the DOJ almost certainly has no appetite to do.” Moffett thinks “ultimately, the deal is much more likely to be given a relatively clean approval or rejection.”

BTIG’s Walter Piecyk is skeptical anything changed. “I’m not sure why anyone’s odds are changing given that nothing has happened except the start of the investigation process by the FCC and DOJ,” he said. "I am 90 percent confident that there is not a 90 percent probability on anything happening in D.C. right now.” The companies didn't comment.

“There is a lot left to this process and we certainly don't think the deal is a slam dunk,” said a spokesperson for Communications Workers of America, a lead group opposing approval. “CWA and others have raised serious concerns about the supposed public interest benefits of the merger, California is conducting its own investigation and the new Democratic majority in the House may hold hearings.”