Politics Break Out as Top T-Mobile, Sprint Executives Defend Deal on Hill

T-Mobile will remain the “uncarrier” and ensure “America wins the 5G race,” Legere said: The deal "will produce a faster, broader, deeper network that is truly nationwide. … Neither company can do this on its own.” Opponents wrongly claim higher prices are inevitable, he said: “The opposite is true.”

Claure said Sprint was “near financial ruin” in 2013, with $31 billion in debt. The company has been “transformed” since but still faces big challenges, especially the “quality” of its network, he said. “We cannot fix our network because of our poor financial situation and our lack of low-band spectrum,” Claure said. “Sprint still struggles to attract lots of customers” and many leave for faster networks, he said: “Customers today are not willing to sacrifice quality.”

AT&T and Verizon have almost 70 percent of the market and 93 percent of industry cash flow, Claure said: “There is no way that we can invest and be able to compete at the same level.” Sprint would have to spend up to $25 billion for 5G in a limited area. It might have to borrow money and raise prices to pay off its debt, he said: “We could no longer be the price leader.”

Rep. Hank Johnson, D-Ga., asked if T-Mobile executives stayed at the Trump hotel nine times since April when the deal was announced, compared with two times before. Rep. Pramila Jayapal, D-Wash., also burrowed in.

“I made the decision,” Legere said. “I’m a longtime Trump hotel stayer long before this transaction.” Legere confirmed T-Mobile spent some $195,000 at the hotel (see 1903050044). He said that's only a small percentage of what the company spends yearly in Washington.

“Do you see how that looks?” Johnson asked. “It looks like … T-Mobile is trying to curry favor with the White House.” Legere said DOJ and the FCC will judge the deal on its merits. “The optics of me staying at the Trump hotel hasn’t changed in 10 years,” he said.

“Where Mr. Legere and T-Mobile employees stay when they come to Washington really has no relationship whatsoever to whether or not this proposed merger is in the public interest,” said ranking member Jim Sensenbrenner, R-Wis. “I’m kind of embarrassed sitting here listening to the gentleman from Georgia’s line of questions.”

Chairman David Cicilline, D-R.I., started the hearing with a reminder that the breakup of AT&T led to competition and cost savings for consumers. The “retreat” from vigorous antitrust policies means there are only four national wireless carriers, he said. Cicilline is “deeply skeptical” the deal will mean lower prices, better competition and more buildout in rural communities.

Under DOJ guidelines, “mergers that significantly increase concentration in highly concentrated markets are presumed to be illegal,” Cicilline said. “It is beyond dispute that this transaction will significantly increase concentration in the wireless market far beyond the level that the antitrust agencies consider to be likely to enhance market power.”

Cicilline said the panel will investigate reports President Donald Trump pressured two now-former administration officials to ensure Justice filed a now-ended lawsuit to block AT&T/Time Warner (see 1903050069). Is the DOJ Antitrust Division “genuinely” dedicated to competition “or does it only oppose mergers when the White House tells it to do so?” Cicilline asked. "It is beyond dispute that this transaction will significantly increase concentration in the wireless market far beyond the level that the antitrust agencies consider to be likely to enhance market power,” he said.

Partisan Spin

Sensenbrenner was “disappointed” Cicilline put a “partisan spin” on the hearing even before witnesses could testify. Sensenbrenner said he hasn’t decided whether the transaction should move forward and is in the public interest. The deal “undoubtedly will change the telecommunications landscape,” he said. It “could” put the new company in a position to take on AT&T and Verizon, he said.

“I don’t think that antitrust questions should be partisan in nature,” Sensenbrenner said. He said he has been on the committee 40 years and there are few antitrust cases “where Republicans and Democrats have been divided from the get-go.”

Judiciary Committee Chairman Jerry Nadler, D-N.Y., said lawmakers must decide whether the combination would “have less incentive to innovate” and could have a negative effect on wireless competition. “While I do not prejudge the merits of any proposed merger, it is clear that this transaction … would usher in significant changes to the market,” he said: “We must determine whether this new proposed new combined company” will “have less incentive and to compete with other companies.”

Gigi Sohn, aide to then-FCC Chairman Tom Wheeler, discussed how five years ago, the two companies dropped plans to combine when questions arose. Wheeler “believed strongly that reducing the number of wireless carriers from four to three would harm consumers through higher prices, coordinated effects and less innovation,” she said. “Nothing in the intervening five years has altered the previous analysis.”

University of Pennsylvania Law School professor Christopher Yoo said to deploy 5G, a company needs a mix of low-band and higher band spectrum. “Sprint lacks the low-band spectrum to be able to provide 5G in rural areas as a stand-alone company,” he said.

“We do not know what the 5G world will look like, that’s the nature of innovation,” said Technology Policy Institute President Scott Wallsten. “Without evidence that the merger is likely to lead to bad outcomes there is little reason for the government to oppose it.” Regulators should look closely at low-income and wholesale markets, where the two are particularly strong, he said.