T-Mobile, Sprint step up merger push

T-Mobile, Sprint step up merger push
© The Hill illustration

T-Mobile and Sprint are ramping up their efforts to get regulators to sign off on their $26 billion merger, promising not to raise prices on consumers and tapping former public officials to help sell the deal.

T-Mobile CEO John Legere wrote a letter to Ajit Pai, the chairman of the Federal Communications Commission (FCC), on Monday pledging that if the merger is allowed to go through, the combined companies will not raise prices on consumers for at least three years.

He also lashed out at the outspoken legion of merger critics, whom he derided as business rivals “largely employed by Big Telco and Big Cable.”

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“To remove any remaining doubt or concerns about New T-Mobile’s prices while we are combining our networks over the next three years, T-Mobile today is submitting to the Commission a commitment that I stand behind — a commitment that New T-Mobile will make available the same or better rate plans for our services as those offered today by T-Mobile or Sprint,” Legere wrote.

“We believe this merger makes consumers better off, and we’re willing to put our money where our mouth is.”

The mega-deal, which the companies predict will close in the first half of the year, would combine two of the nation’s four largest mobile carriers, worrying many Democrats and public advocates who fear the impact on competition and consumers.

The new push comes as congressional Democrats are vowing to subject the deal to fresh scrutiny, with Legere and Sprint Executive Chairman Marcelo Claure both slated to testify before a joint hearing of House Judiciary and House Energy and Commerce subcommittees next week.

The companies are pulling out all the stops to ensure that there are no regulatory obstacles ahead.

In recent days, the company has won over some key Democrats who are often at odds with the telecom industry.

Mignon Clyburn, a former FCC commissioner who had spoken out against industry consolidation, revealed on Monday she had been hired to advise the companies on the merger.

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And last week, Rep. Anna EshooAnna Georges Eshoo Cuts to Medicare and Medicaid will cause overall health-care costs to rise Overnight Health Care — Presented by PCMA — FDA issues proposal to limit sales of flavored e-cigs | Trump health chief gets grilling | Divisions emerge over House drug pricing bills | Dems launch investigation into short-term health plans Divisions emerge over House drug price bills MORE (D-Calif.), one of the most senior members of the House Energy and Commerce Committee, led a group of lawmakers in endorsing the merger in a letter to the FCC.

But despite the endorsements from current and former policymakers, the opinions that matter are those of the FCC and Department of Justice officials who are reviewing the transaction. Both agencies have a policy of not speaking about active proceedings.

The lack of transparency has observers wondering how regulators are approaching their review.

Critics of the deal have argued that combining two of the only four major national wireless providers will have grave consequences for consumers. They say the reduced competition will lead to higher rates and less incentive for investment.

The 4Competition Coalition, an array of groups aligned against the merger, said that Legere’s promise to the FCC was an admission that the combination would hurt customers.

“Committing to not raise ‘rate plans’ for three years is an empty promise that does not provide any real price protection for consumers,” the coalition said in a statement. “In fact, T-Mobile’s announcement has confirmed exactly what their own data shows: The merger will eliminate wireless competition and increase prices for consumers.”

That argument has been endorsed by regulators in the past, most notably for T-Mobile and Sprint in 2014, when they floated a merger before the Obama administration. Regulators at the time discouraged them from moving forward.

But the companies believe they have a better chance this time around and argue that their merger is necessary because it will allow them to better compete with Verizon and AT&T in deploying the next-generation wireless networks known as 5G.

That pitch is tailored for the Trump administration, which believes the new technology will be vital to U.S. national and economic security.

“Our business plan and our future success are centered around building a world class 5G network for everyone and delivering more to consumers for less,” Legere wrote in his letter.

It’s still unclear which narrative President TrumpDonald John TrumpMueller report findings could be a 'good day' for Trump, Dem senator says Trump officials heading to China for trade talks next week Showdown looms over Mueller report MORE’s regulators are buying into and until Justice Department and FCC officials wrap up their inquiries, there will be few if any concrete clues about the deal’s prospects.

But Blair Levin, an analyst with New Street Research and a former FCC official, believes that Legere’s pledge shows that T-Mobile and Sprint are having a hard time of convincing agencies of the merger’s merits.

“It suggests that the prospect of price increases is a significant problem with staffs of the Justice Department and the FCC,” Levin told The Hill. 

He also noted another threat to the merger: A potential lawsuit from state attorneys general could scuttle the deal even if it gets cleared at the federal level.

Levin said it’s possible Legere made the pricing concession as a condition demanded by regulators but that it seems more likely it was made in an effort to appease those concerned about the merger’s effects on consumers.

But the offer also highlights the high political stakes at play in the merger.

“The most probable conclusion is they’re making this appeal to political logic as opposed to traditional economic antitrust logic,” he said.

“They don’t make that commitment if their economic argument is winning.”