Tech by VICE

The Unpopular Sprint, T-Mobile Merger Looks Increasingly Doomed

Regulators aren’t sold on the companies’ claims that fewer competitors means more competition and lower prices.

by Karl Bode
Apr 17 2019, 4:58pm

Image: T-Mobile

While Sprint and T-Mobile have been telling federal regulators that their $26.5 billion mega-merger will be great for consumers and competition, it’s becoming increasingly clear that some federal regulators just aren’t buying it.

The deal would combine the nation’s third and fourth-biggest wireless carriers, reducing overall competition in a US wireless industry already featuring some of the highest data prices in the developed world. Consumer groups, unions, and Wall Street analysts also warn the deal could result in anywhere between 10,000 and 30,000 people losing their jobs.

Granted, Sprint and T-Mobile executives have been telling the press, public, and regulators the exact opposite over the last year, claiming that reducing overall competitors will somehow increase competition and lower rates, all while somehow creating more jobs than ever before.

But it’s not clear regulators are buying it. Reports in both the Wall Street Journal and Reuters indicate that the deal is “meeting some resistance” from Department of Justice antitrust enforcers worried about the deal’s impact on overall wireless competition. The reports claim the deal is unlikely to be approved by the DOJ as currently structured.

T-Mobile CEO John Legere quickly took to Twitter to claim that the “premise” of the story was “simply untrue.”

But this isn’t the first example of regulators doubting the companies’ merger promises. A growing roster of state regulators and attorneys general have also expressed skepticism that the deal is in the public interest, noting that historically, such telecom sector consolidation harms both competition and consumer welfare.

“There’s no good way to spin this,” Wall Street telecom analyst Craig Moffett told Motherboard. “The deal is in real trouble.”

After initially giving the merger a 50 percent chance of approval, Moffett’s research firm MoffettNathanson recently lowered the chances to around 30 percent in a research note to investors, citing growing calls for tougher antitrust enforcement, opposition from state regulators, and the repeated blocking of similar deals in the not so distant past.

For example regulators blocked AT&T’s 2011 attempted merger with T-Mobile, stating it would harm consumers. T-Mobile went on to not only survive but thrive—injecting the sector with additional competition. A 2014 attempted merger between Sprint and T-Mobile was also blocked by regulators—again driven by worries of reduced competition and higher rates.

Hoping the third time’s the charm, T-Mobile has hired everyone from former Trump ally Corey Lewandowski to former FCC Commissioner Mignon Clyburn to sell the deal to regulators. T-Mobile executives have also come under fire for ramping up their patronage of Trump’s hotel in DC, in what’s widely seen as a ham-fisted attempt to curry favor.

While it remains possible the deal could still be approved with conditions, consumer groups were pleased with the reports of regulatory hesitation. A coalition of such groups this week filed a petition with the FCC featuring the signatures of 60,000 Americans opposed to the deal.

Consumer groups have argued that the one-two punch of greater consolidation and less oversight in the wake of the death of net neutrality could easily open the door to higher rates, worse customer service, and little recourse for American consumers.

“We are encouraged by news of the potential demise of this bad deal,” Free Press Senior Policy Counsel Carmen Scurato told Motherboard in a statement. “T-Mobile and Sprint executives can’t make the case for this deal’s public benefits because there aren’t any. Regulators digging in on the details are rightfully skeptical of the bogus claims made by these companies. No conditions will improve the merger, and it must be rejected.”

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