T-Mobile, Sprint deal faces fresh uncertainty

T-Mobile, Sprint deal faces fresh uncertainty
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T-Mobile and Sprint are facing growing uncertainty about the fate of their $26 billion merger a year after the deal was first announced.

On Monday, the anniversary of the proposal, Assistant Attorney General Makan Delrahim, who leads the Department of Justice’s (DOJ) Antitrust Division, said that he’s still undecided about the merger.

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“I have not made up my mind,” Delrahim told CNBC. “The investigation continues. We’ve requested some data from the companies that will be forthcoming. We don’t have a set number of meetings or, necessarily, a timeline.”

Delrahim’s comments come two weeks after The Wall Street Journal reported that his staff had major qualms with the merger. According to the Journal, DOJ staffers told the two companies that their tie-up is unlikely to be approved under the structure they had proposed.

T-Mobile pushed back on the report after it ran.

“The premise of this story, as summarized in the first paragraph, is simply untrue,” T-Mobile CEO John Legere said in a tweet. “Out of respect for the process, we have no further comment. This continues to be our policy since we announced our merger last year.”

On Monday, though, the two companies, for the second time, postponed their deadline for completing the merger.

The deal has generated significant concern from public interest groups and many Democrats, and the delay of approval has given critics more time to fire away at the deal. Opponents worry about the prospect of further consolidating the wireless market from four national operators to three.

The 4Competition Coalition — a mix of public interest groups, labor unions and private companies that oppose the merger — has warned that the deal would hurt both wireless customers and employees.

“In the year since T-Mobile and Sprint announced plans to merge, they have failed to show that this deal is in the public interest and complies with antitrust law,” the coalition said in a statement.

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“The evidence in the record demonstrates that this deal would stifle competition, substantially increase prices, and harm consumers throughout this country — all without any meaningful merger-specific benefits. The companies seem to believe PR and spin will carry the day, but we believe that, based on the facts and the law, this proposed merger should be blocked.”

T-Mobile declined to comment to The Hill. Sprint did not respond when asked to comment.

T-Mobile and Sprint, the third and fourth largest wireless providers in the country, respectively, have vigorously pushed back against critics’ issues with the merger. They have argued that by combining they will be able to better compete as the wireless industry begins to deploy the next-generation 5G networks that have been the subject of much hype from the Trump administration and the private sector.

T-Mobile says that, post-merger, the 5G buildout will create jobs and result in a network that can rival those of the top-tier providers, Verizon and AT&T.

When T-Mobile and Sprint last floated a merger, the Obama administration discouraged the idea because of concerns that it would raise prices and hurt competition. The companies are hoping that their new pitch will find buy-in from an administration that has emphasized 5G as an economic and national security priority.

Despite the pushback from T-Mobile on reports questioning the deal, analysts have steadily become less optimistic about the merger’s odds of getting approval.

Walter Piecyk, a telecom analyst with BTIG, wrote in a note to investors on Monday that he believes the deal has a 35 percent chance of being approved.

Piecyk said in a phone interview with The Hill that the biggest question pertaining to the merger’s fate is whether regulators are buying the argument that it will help 5G deployment and whether they believe that should offset other concerns about the deal.

“If there’s an expectation that prices could increase as a result of the merger, then the companies have to establish other efficiencies that benefit the consumer,” he said.

Delrahim alluded to that dilemma on Monday. “With 5G and other technologies, you’re going to be able to use that phone for more than just communicating with your best friend or texting,” he told CNBC. “You’re getting your media, you’re getting video — we want to be sure to encourage that, but ultimately, is there going to be a price effect when those two combine?”

Piecyk said that even if the Justice Department and the Federal Communications Commission were to clear the deal, the companies would still have to worry about potential opposition from the states.

Bloomberg reported in March that a group of state attorneys general was exploring a lawsuit to scuttle the merger.

For now, the merger review is likely to drag on.

“I think by saying that he has not made a decision [it] is likely an indication that we’re not getting an imminent response from the DOJ on the merger,” Piecyk said.