T-Mobile/Sprint Merger Is In Danger of Being Rejected By DOJ (arstechnica.com)

An anonymous reader quotes a report from Ars Technica: T-Mobile U.S. and Sprint are facing potential rejection of their proposed merger at the U.S. Department of Justice. DOJ staffers "have told T-Mobile US and Sprint that their planned merger is unlikely to be approved as currently structured," The Wall Street Journal reported today, citing people familiar with the matter. "In a meeting earlier this month, Justice Department staff members laid out their concerns with the all-stock deal and questioned the companies' arguments that the combination would produce important efficiencies for the merged firm," the Journal wrote. DOJ staffers' recommendations aren't the final word at the agency. The department's antitrust chief, Makan Delrahim, would decide whether to challenge or allow the merger.

The Justice Department's antitrust division is reviewing the merger and could file a lawsuit in federal court in an attempt to block the deal. Success isn't guaranteed, a fact the DOJ was reminded of when a U.S. District Court judge allowed AT&T to buy Time Warner despite DOJ opposition. The DOJ could also approve the merger with conditions, but that would require agreement with T-Mobile and Sprint on what those conditions would be. "T-Mobile and Sprint could offer concessions, such as assets sales, to address the government's concerns," the Journal wrote. Sprint shares "are trading at a roughly 20 percent discount to the price implied by the all-stock deal, signaling Wall Street doubts about the combination's chances," the report also said. T-Mobile CEO John Legere denied the report in a tweet, saying that "[t]he premise of this story... is simply untrue. Out of respect for the process, we have no further comment." Sprint Executive Chairman Marcelo Claure also claimed that the "article is not accurate," adding that Sprint "continue[s] to have discussions with regulators about our proposed merger."

Comments

Why this one?

[Daetrin]

AT&T merging with Time-Warner is fine, Disney and Fox merging is fine, but T-Mobile and Sprint is going too far?

I'm all well and good with the DOJ exercising its functions in general, but maybe they should have started exercising them a little earlier?

Re:Why this one?

[jonwil]

The DOJ actually blocked the AT&T/Warner merger but were overruled by the courts.

Re:Why this one?

[Xuranova]

The DoJ TRIED to stop the ATT/TW merger and lost in court.
The DoJ had Fox make concessions with divesting 22 regional sport channels since tESPN is probably the singles biggest force in sports broadcasting(property of Disney).

 

Re:Why this one?

[MachineShedFred]

No, instead Sprint's legacy is being the spawn of a railroad company, and railroad companies never did anything bad or abusive in the past.

FYI, "Sprint" used to be an acronym: Southern Pacific Railroad Internal Network Telecommunications

Re:Why this one?

[Solandri]

AT&T and Time Warner are, for the most part, orthogonal. Most municipal governments have granted a cable monopoly to a single company. So there were very few areas where AT&T (U-verse cable, not phone/DSL) competed with Time Warner. Whereas Sprint and T-Mobile (and Verizon and AT&T) are direct competitors almost everywhere.

This argument is a bit weakened since AT&T owns DirecTV. But IMHO that merger was the one which should never have been allowed since (1) DirecTV competed with every cable company, and (2) the fact that DirecTV and Dish competed with every cable company was the entire basis of the previous ruling that local cable monopolies were OK. The cable companies successfully argued that they weren't really monopolies because satellite TV competed with them. By that reasoning, the moment AT&T bought DirecTV (which had bought a chunk of Dish), every cable monopoly contract in the country should have been invalidated and all those local governments forced to allow at least two cable companies to compete.

I'm for this merger BTW (disclaimer: I'm on Sprint). I don't see four cellular carriers as realistic - Sprint has been on life support for close to a decade. I only see two realistic outcomes here.

• Sprint and T-Mobile merge and we have three reasonably strong cellular carriers.
• Or they block this merger, Sprint goes bankrupt a few years later. Verizon and AT&T (being in the financially stronger position) buy up most of what used to be Sprint. And we end up with two cellular behemoths and a struggling T-Mobile.

You do NOT want the second one. Most of the discount MVNOs are using Sprint's network (part of the reason why Sprint regularly finishes last in speed tests - Sprint went for quantity over quality). If Sprint goes bankrupt, all those MVNO network contracts will be invalidated. Prices on all those MVNOs will go up as they have to negotiate new contracts.with the remaining three carriers. With a merger, the new Sprint/T-Mobile will still be legally bound to honor those old MVNO contracts.

Re:Equal consideration under the law?

[rmdingler]

Combined, Sprint and T-Mobile will still only be the third largest carrier in the US behind Verizon and AT&T, hardly monopoly territory.

It seems more likely they haven't greased the right wheels in Washington.

Re:Equal consideration under the law?

[squiggleslash]

Stopping the merger has nothing to do with preventing monopolies, in fact the reverse is true.

If the Sprint-T Mobile merger goes ahead, there will be three large mobile carriers able to compete with one another.

If it doesn't, there will be two large mobile carriers and one smaller carrier. (Sprint is pretty much dead at this point, it's not shown a yearly profit in over a decade, the mobile portion hasn't, to the best of my knowledge, ever been profitable.)

Two carriers dominating the industry is far more monopolistic than three.

Owners

[spinitch]

Coincidentally, Both T-Mobile US and Sprint have large foreign entity owners. SoftBank seems willing to give into pressure to not use Huawei but not sure if Deutsche Telecom which has broader telecom services investments will block Huawei.

Re:Equal consideration under the law?

[Martin Blank]

Sprint actually posted a profit for the last fiscal year, though I'm not sure how much that had to do with accounting tricks. They had a profitable mobile division before the Nextel purchase, but they never were able to take full advantage of the push-to-talk architecture that Nextel brought (and that was the entire reason for the $35 billion purchase). Then they made the extraordinarily bad decision to go with WiMax instead of LTE, blowing billions in the rollout and making them less desirable to customers because there would be no 4G roaming. It could have survived one or the other, but not both.

I'm not sure what DOJ's problem is, but I hope that the two companies are willing to address it. As you say, Sprint is effectively dead at this point (I say this as a 17-year customer of Sprint and Nextel), and will declare bankruptcy. They recently announced the sale of their HQ campus in Overland Park, KS, with a deal to lease it back. That's never a good sign. It's unclear how much more money Masayoshi Son is willing to pour into it, but it has to stop at some point. Then the remaining three companies will scramble to buy up parts of it at pennies on the dollar, and I doubt it will be as clean or have as even a result as the current merger could.

Book more rooms

[Cajun Hell]

This is Trump's way of saying that he doesn't care if T-Mobile employees literally stay at his hotel, but they damn well better pay for more of those rooms.

That's not the point

[rsilvergun]

it's not about how big they'll be, it's about having one less carrier. Also, T-Mobile was the "uncarrier". And as cringey as that sounds it really did count for something. They were spiraling downhill fast and then switched to unlimited talk/text/data while everyone else was using nasty tricks to get you to go over limit and hit you with a $300 bill once or twice a year. I switched to T-Mobile when AT&T bought out Cricket for just that reason, and while Cricket didn't go the way of AT&T's metering and overcharges it's mostly because T-Mobile's strong competition wouldn't let them.

It's not just that we're reducing competition, it's that we have a recent example in our mind's of why we need competition.

Re:No Danger

[MachineShedFred]

Yeah, because having the #4 mobile operator in the US fall apart from bankruptcy and have the top 3 buy their assets and leave their customers in the cold is a way better outcome than having #3 and #4 merge, creating.... the #3 largest mobile operator in the US.

This deal would close the gap between the top two and #3, ensuring better competition and keeping the market working the way it's supposed to. Does anyone know what the DoJ's specific complaints are here? As I understand it, their ability to block these kinds of things are based upon antitrust law, and it's pretty clear this isn't creating a monopoly of any sort - not in mobile communications, and not in traditional long distance carrier service as T-Mobile doesn't operate any.