Deutsche Telekom AG (DTE)’s proposal to buy MetroPCS Communications Inc. (PCS) will probably win approval from U.S. regulators who are wary of the market power wielded by industry leaders Verizon Wireless and AT&T Inc. (T)
“There would be a regulatory hope this would strengthen both competitors versus the two big guys,” David Kaut, a Washington-based analyst for Stifel Nicolaus & Co., said in a telephone interview.
Bonn-based Deutsche Telekom today announced it will pay $1.5 billion to shareholders of MetroPCS, the fifth-largest U.S. mobile provider, and merge the company with Deutsche Telekom’s T-Mobile USA Inc. unit, the fourth-largest carrier.
The new company would have 42.5 million subscribers, according to data compiled by Bloomberg -- or about 11.7 percent of the U.S. wireless market, compared with a 58.5 percent combined share for No. 1 Verizon and No. 2 AT&T. Sprint Nextel Corp. (S), the third-largest provider, has 15.2 percent
The deal, subject to review by the U.S. Federal Communications Commission and Justice Department, probably will be approved because it doesn’t pose threats to competition like those raised by AT&T’s failed bid for T-Mobile last year, Kaut said.
“To the extent this acquisition helps strengthen T- Mobile’s position and preserve a four-firm national market, it’s pro-competitive,” said Allen Grunes, an antitrust lawyer with Brownstein Hyatt Farber Schreck LLP in Washington. “I’d expect the Justice Department to look at local markets and then close the investigation and let the merger go through.”
The FCC under Democratic Chairman Julius Genachowski, in a break with Republican predecessors, has declined to declare that the U.S. wireless market is competitive.
President Barack Obama’s administration is concerned about Verizon and AT&T outstripping competitors as the market moves increasingly to higher-speed data known as 4G, Jeffrey Silva, a Washington-based analyst for Medley Global Advisors, said in an interview.
“It’s hard to see where the FCC and Justice Department would have trouble clearing a T-Mobile deal with PCS,” Silva said. Government clearance is likely in the first half of 2013, he said.
Regulators should review the deal quickly, Representative Anna Eshoo, of California, said in an e-mailed message today.
“At a time when two companies continue to dominate the wireless marketplace, the need for a strong national competitor has never been greater,” said Eshoo, the top Democrat on the House subcommittee on communications and technology.
Neil Grace, a spokesman for the FCC, which regulates airwaves’ use, declined in an e-mail to comment on how the agency might handle the deal.
Gina Talamona, a spokeswoman for the Justice Department, which would examine the deal for anti-competitive impact, declined to comment.