Long Odds for Sprint-T-Mobile Merger

A man talks on a mobile phone at the T-Mobile stand at the CeBIT technology fair March 15, 2007 in Hanover, Germany. CeBIT, the world's largest tech fair, will run from March 15-21. (Photo by Sean Gallup/Getty Images)
National Journal
Laura Ryan
Add to Briefcase
See more stories about...
Laura Ryan
Dec. 17, 2013, 10:19 a.m.

Sprint is flirt­ing with a bid to buy T-Mo­bile, but even if the wire­less gi­ant does pop the ques­tion, a wary Uncle Sam may stop the two from ever com­ing to­geth­er.

News leaked last week that Sprint is con­sid­er­ing a T-Mo­bile mer­ger, and at first blush, it ap­pears like a win for those look­ing to keep the wire­less world com­pet­it­ive: With a stronger net­work, bet­ter scale, and lar­ger cus­tom­er base, a com­bined T-Mo­bile and Sprint would be equipped to bet­ter com­pete with Ve­r­i­zon and AT&T.

Main­tain­ing fair com­pet­i­tion is a pri­or­ity for both the Justice De­part­ment and Fed­er­al Com­mu­nic­a­tions Com­mis­sion, so there is “a de­cent ar­gu­ment that Sprint and T-Mo­bile to­geth­er would be a stronger long-term coun­ter­weight to AT&T and Ve­r­i­zon,” said Paul Gal­lant, a man­aging dir­ect­or at Gug­gen­heim Se­cur­it­ies.

But con­sid­er­able reg­u­lat­ory and tech­nic­al obstacles stand in the way.

The ma­gic num­ber for a com­pet­it­ive wire­less mar­ket­place is four, not three, ac­cord­ing to the FCC and DOJ. They are un­likely to ap­prove such a mer­ger for the same reas­on they pre­ven­ted AT&T’s $39 bil­lion ac­quis­i­tion of T-Mo­bile in 2011: Less com­pet­i­tion would lead to high­er con­sumer prices.

Al­though Sprint is nowhere AT&T in mar­ket share, these con­cerns still re­main strong.

“The mo­bile busi­ness today is today with four car­ri­ers a com­pet­it­ive busi­ness and [it’s] im­port­ant to stay that way,” FCC Chair­man Tom Wheel­er said in a Q&A fol­low­ing his first pub­lic re­marks on Dec. 2.

Also, T-Mo­bile is ex­per­i­en­cing an un­ex­pec­ted re­viv­al from its near-death in 2011. After four years of de­cline, the third-largest mo­bile car­ri­er has had two quar­ters of growth, cour­tesy of an en­er­get­ic CEO and a “blitz” of new of­fer­ings, in­clud­ing the iPhone 5 and LTE ser­vice. Reg­u­lat­ors will want to see how this plays out.

“This really demon­strates that com­pet­i­tion can work,” Wil­li­am J. Baer, DOJ’s chief an­ti­trust law­yer, told The New York Times just last month. “When you have feisty rivals whose sur­viv­al de­pends on in­nov­at­ing and dif­fer­en­ti­at­ing, they can gain mar­ket share and loosen the oli­go­poly. That’s ex­actly what T-Mo­bile has done.”

Even if Sprint can suc­cess­fully over­come the sig­ni­fic­ant reg­u­lat­ory hurdles to ac­quire T-Mo­bile, it would face un­ruly and ex­pens­ive tech­no­lo­gic­al chal­lenges to com­bine the two net­works.

Al­though the tim­ing might not be right for a T-Mo­bile-Sprint mar­riage this time around, a uni­on may be in­ev­it­able down the road. The in­dustry has been con­sol­id­at­ing over the past couple of years, so a mer­ger may be in their fu­ture if either Sprint or T-Mo­bile be­gins to lose mo­mentum.

What We're Following See More »
SANS PROOF
NRA Chief: Leftist Protesters Are Paid
1 days ago
UPDATE
NEW TRAVEL BAN COMING SOON
Trump Still on Campaign Rhetoric
2 days ago
UPDATE
“WE’RE CHANGING IT”
Trump Rails On Obamacare
2 days ago
UPDATE

After spending a few minutes re-litigating the Democratic primary, Donald Trump turned his focus to Obamacare. “I inherited a mess, believe me. We also inherited a failed healthcare law that threatens our medical system with absolute and total catastrophe” he said. “I’ve been watching and nobody says it, but Obamacare doesn’t work.” He finished, "so we're going to repeal and replace Obamacare."

FAKE NEWS
Trump Goes After The Media
2 days ago
UPDATE

Donald Trump lobbed his first attack at the “dishonest media” about a minute into his speech, saying that the media would not appropriately cover the standing ovation that he received. “We are fighting the fake news,” he said, before doubling down on his previous claim that the press is “the enemy of the people." However, he made a distinction, saying that he doesn't think all media is the enemy, just the "fake news."

FBI TURNED DOWN REQUEST
Report: Trump Asked FBI to Deny Russia Stories
2 days ago
THE LATEST

"The FBI rejected a recent White House request to publicly knock down media reports about communications between Donald Trump's associates and Russians known to US intelligence during the 2016 presidential campaign, multiple US officials briefed on the matter tell CNN. But a White House official said late Thursday that the request was only made after the FBI indicated to the White House it did not believe the reporting to be accurate."

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login