DOJ OK of T-Mobile/Sprint Likely Not a Slam Dunk, Say Analysts
There’s no guarantee DOJ will follow the FCC’s lead and approve T-Mobile’s buy of Sprint, analysts wrote investors this week. The agencies have been coordinating their work on the deal (see 1905200051). “DOJ has a different statutory mandate than the FCC,” a department official said Tuesday. Review of the transaction is still “a very fluid situation” even though the two regulators are “typically aligned on telecom-related merger decision,” said Wells Fargo’s Jennifer Fritzsche.
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“We should not assume that FCC approval guarantees DOJ approval,” MoffettNathanson’s Craig Moffett told investors. “DOJ will take some time -- probably just a few weeks -- to evaluate what is now essentially a new deal (divesting Boost), and they will have to determine whether this new proposal is or isn’t sufficient to ameliorate the competitive concerns about the original proposal.” Market concentration levels could still weigh in favor of Justice saying "no," he said: A traditional Herfindahl-Hirschman Index “analysis will feature prominently in the new evaluation… and that’s a problem.”
“Based on prior mergers where FCC and DOJ worked together, and the different standards they use, we think DOJ is still a potential no on the merger,” a Public Citizen spokesperson said. The group said earlier Tuesday that Pai "completely failed to address any of the real harms this merger will cause." It wants Justice to seek to block the transaction.
Altice, meanwhile, reported on meetings at the FCC to oppose the deal. The meetings came before T-Mobile/Sprint concessions were announced, which include provisions addressing the combined company’s mobile virtual network operator (MVNO) relationship with Altice. Representatives met last week with Commissioner Geoffrey Starks and aides to Chairman Ajit Pai and Commissioner Brendan Carr, said a filing in docket 18-197. A spokesperson said Tuesday Altice has nothing to add now.
Recon Analytics' Roger Entner told us the FCC’s focus on the spinoff of Boost is a surprise. “Traditionally, the FCC has not viewed an MVNO as impactful enough to change market dynamics,” he said: “Another surprise is the lack of spectrum divestitures. The deal … is a huge gift to T-Mobile. It will also be interesting how the FCC explains overturning the AT&T/T-Mobile merger rejection where the FCC declared that a reduction from four to three carriers was ‘per se’ not in the public interest.”
U.S. Black Chambers supported the takeover. "T-Mobile and Sprint have made substantial commitments to close the digital divide and advance the U.S.'s leadership in 5G,” said USBC President Ron Busby: “This comes as great news, as black entrepreneurs continue to be the fastest growing population of entrepreneurs during a time of mass innovation.”
Other groups continue to express opposition. “No one can make a silk purse out of this pig’s ear,” former Commissioner Michael Copps, now at Common Cause, told us. Pai is “obviously in a mad rush, announcing before DOJ decides, which has not been the norm,” Copps said. “Then again, this commission hasn’t been the norm, either.”
The commitments “do not add up to real 5G services for rural and small town America,” emailed Michael Calabrese, director of the Wireless Future Project at New America. “Six long years from now, only two-thirds of the rural population would have service that is even one-tenth as robust as the real 5G that other carriers are already deploying in more profitable urban areas. The reality is that the merged company is no more likely to extend the ultra-fast 5G service that carriers are touting into rural and even exurban areas for many years.”
House Judiciary Antitrust Subcommittee Chairman David Cicilline, D-R.I., is concerned about the FCC's expected approval of T-Mobile/Sprint. Pai's support for the deal “is deeply concerning,” Cicilline said. “Consolidation is a threat to progress and economic opportunity, not the driver of it. Actual competition in the wireless market is critical to building out the next generation of internet and wireless services.” T-Mobile's “empty promises” of concessions to gain federal approval of the buy “will not make this transaction a good deal for American workers and consumers,” Cicilline said. “The burden is on Sprint and T-Mobile to show that this deal is not illegal. I expect [DOJ] to hold them to that longstanding requirement.”
“Like prior mega-mergers in the telecom industry, the proposed T-Mobile/Sprint merger is anti-competitive, threatening consumers and creators alike. It has become painfully clear that placing conditions on this type of deal will not protect competition,” said Writers Guild of America West on Tuesday. “We should not allow history to repeat itself.”