Sprint-T-Mobile deal would face uphill battle

From the headlines this week, you might think that the Sprint/T-Mobile merger is just a formality or two away. But analysts believe some very high hurdles stand between the two companies and a new mega-telecom.

According to The Wall Street Journal, executives at the Japanese firm Softbank, Sprint's owner, and Deutsche Telekom, T-Mobile's German parent, “have agreed on the broad outlines of a merger valuing T-Mobile at around $32 billion.” Softbank would pay $40 a share  for T-Mobile, with T-Mobile retaining a 15-20 percent stake in the merged entity. Reports are that T-Mobile would get a $1 billion break-up fee if regulators turn down the deal. There are still many details to work out before a deal is announced.

U.S. regulatory authorities have expressed strong reservations about any Sprint/T-Mobile merger. For instance, last February FCC Chair Tom Wheeler told Sprint CEO Masayoshi Son and T-Mobile USA chief executive Dan Hesse that “...he was highly skeptical of the potential bid by No. 3 wireless provider Sprint to acquire No. 4 rival T-Mobile.” And William J. Baer, assistant attorney general for the antirust division of the US DOJ that ”it would be difficult for the Justice Department to approve a merger among any of the top four wireless phone companies.”

New York-based Moffett Nathanson gives the deal a mere 10 percent chance of approval, noting that regulators are considering Comcast/Time Warner and AT&T/DirecTV as well. “Approving all three would be untenable for the left. Rejecting all three would be untenable for the right. At least one of the three would have to be rejected. And it's easy to see which one of the three it would be.”

Because Sprint is Japanese-owned and T-Mobile is part of Deutsche Telekom, the combined company would mean that the largest owner of U.S. spectrum would be foreign-owned. In addition, the merger would reduce the number of bidders in the upcoming broadcast spectrum auction. And, the Justice Department’s antitrust division as well as the FCC have has said the U.S. needs four major telecom players, with T-Mobile playing a “maverick” role sparking wireless competition, lower prices, and service innovations.

A Sprint/T-Mobile merger would cost jobs. Since Softbank bought Sprint last year, it has laid-off more than 2,700 employees.

As it stands, a merger between Sprint and T-Mobile would harm competition, consumers, and workers.

Sprint, T-Mobile Move Closer to a $32 Billion Deal (WS Journal, Jun. 4, 2014)

FCC chief tells Sprint chair he is skeptical on T-Mobile deal (Reuters, Feb. 3, 2014)

Wireless Mergers Will Draw Scrutiny, Antitrust Chief Says (NY Times, Jan. 30, 2014)
 
Analyst: A Sprint and T-Mobile merger has a 10 percent chance of approval (Washington Post, Jun. 5, 2014)

CWA: SoftBank-T-Mobile US Deal is Non-Starter (Speed Matters, Jan. 22, 2014)