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T-Mobile and Sprint’s Deal in Peril despite FCC Chair’s OK


Aug. 19 2019, Published 8:47 a.m. ET

The future of the $26 billion T-Mobile (TMUS) and Sprint (S) merger remains unclear. Several state attorneys and Democratic senators have come together to oppose the impending year-long deal. FCC (Federal Communications Commission) Chair Ajit Pai recommended the deal’s approval last week, but it’s still pending the approval of two out of four FCC commissioners.

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Democrats join the opposition

To add to the deal’s woes, Democratic senators have drafted a letter requesting that the FCC ask for a public response on the merger, Fox Business reported. The letter also mentioned concerns about the FCC’s lack of transparency in the merger review and a lack of certainty as to whether the merger would protect competition and customers.

Last month, the US Justice Department approved the proposed merger. T-Mobile agreed to redistribute some of its assets, such as Boost Mobile, to Dish Network (DISH).

When Pai expressed his support for the merger, he claimed that it would ultimately help reduce the digital divide in rural areas by bringing faster 5G network services. T-Mobile believes that it will be in much better shape to deliver 5G services if its Sprint merger receives approval.

Two FCC commissioners and some Democratic senators are pressing the FCC to put Dish Network’s planned 5G deployment out for review before its approval. They also want the FCC to review Dish’s spectrum buildout extension, which has been given until 2023. Pai feels it’s unnecessary.

Last week, David Cicilline, the chair of the House Judiciary Subcommittee on Antitrust, also requested a review of the proposed merger.

T-Mobile and Sprint: Antitrust concerns

The principal objection against the merger remains the related antitrust concerns. Critics say the deal would unfairly empower the combined entity, and customers would eventually suffer.

However, the merger’s biggest threat is expected to be to established wireless service giants Verizon and AT&T (T). The combined entity will be the third-largest wireless carrier in the country. T-Mobile will also likely be close to these two in terms of market share. Its aggressive marketing strategies have gained it a significant market share in the last few years. With a bigger size and scale after the merger, it will likely be a bigger risk for Verizon and AT&T, which have approximately 150 million customers each. The divestiture of T-Mobile and Sprint’s assets will allow Dish to become the fourth-largest wireless carrier in the country, ultimately reducing market concentration.

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Job losses

With Texas and Oregon joining this month, about 16 state attorneys are opposing the union of the third- and fourth-largest wireless carriers. The states are complaining based on allegations of reduced competition, higher prices, and job losses. They have filed a lawsuit to block the deal, and the carriers may not move forward until its resolution.

Workers’ unions have long been battling this proposed merger. Communication Workers of America found that the merger would result in 30,000 job losses. On the other hand, according to John Legere, the CEO of T-Mobile, the merger will create 11,000 jobs by 2024.

Uncertainty has driven T-Mobile and Sprint stocks

Shares of both T-Mobile and Sprint rallied after receiving clearance from the US Justice Department. Both hit their respective 52-week highs on July 26. However, they’ve fallen 10%–15% from their peaks due to growing uncertainties about their union. So far this year, T-Mobile stock is up about 22%, while Sprint has rallied 18%. Dish Network stock is up approximately 30% year-to-date.


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