Sprint's Pursuit of T-Mobile Gets New Hope in Trump's WashingtonBy and
FCC chief Pai has signaled openness to national wireless deals
Commission’s view may steer Justice Department’s response
SoftBank Group Corp. Chairman Masayoshi Son’s dream of uniting his Sprint Corp. with T-Mobile US Inc. almost died in Obama’s Washington. Now Trump officials are giving it new life.
The Federal Communications Commission and the Justice Department’s antitrust division, which united in batting down a proposed Sprint-T-Mobile merger three years ago, may view the tie-up differently under new leaders chosen by Trump. One has already signaled an openness to such a deal.
FCC Chairman Ajit Pai, a Republican, has backed off his predecessor’s stance that the market must have four national competitors. Trump’s nominee to lead the Justice Department’s antitrust division, Makan Delrahim, hasn’t commented publicly on such a deal. But he replaces an avowed foe of a Sprint-T-Mobile tie-up who shared the FCC’s view about the need for four players.
Pai said earlier this month he remained open about the number of players in the U.S. mobile market. “I don’t claim to know in a vacuum what the optimal market structure of any particular marketplace is -- what the right number of competitors should be,” he said after a speech at the American Enterprise Institute May 5. “Our goal as always is to make sure that the marketplace functions in a way that benefits the public interest.”
Sprint Chief Executive Officer Marcelo Claure will be in Washington today and tomorrow for meetings with a variety of officials including regulators, according to a person familiar with the situation.
Pai’s remarks shift attention to the Justice Department, which would also have to approve a tie-up between the two carriers. Son would make his case to Delrahim, whose appointment is pending Senate confirmation after he was nominated by a president with a long history of dealmaking.
A Sprint-T-Mobile tie-up could stoke tensions between the new antitrust chief and the staff lawyers who would investigate a proposed merger. Many of those lawyers have been at the department for years and would almost certainly oppose the combination as anticompetitive, said two people familiar with the division’s thinking. Some of them view the Justice Department’s successful 2011 challenge to AT&T Inc.’s takeover of T-Mobile as their crowning achievement, one of the people said, given T-Mobile’s subsequent growth from a distant No. 4 to the market’s No. 3 ahead of Sprint.
While staff is responsible for making a recommendation about whether to clear such a deal or sue to block it, the ultimate decision is up to the division chief. That’s where the FCC’s view may come into play. If the commission says the deal would be in the public interest, it would weaken any Justice Department effort to challenge it in court and may make the division more reluctant to bring a case, said one of the people familiar with the department’s thinking.
“Sprint-T-Mobile is a lot more plausible than it was a year ago,” said Harold Feld, senior vice president at the policy group Public Knowledge. “It’s not a slam dunk. There are real issues. But at the same time, we clearly have an administration that’s sending signals they would be a lot more open to it.”
Sprint is said to have started preliminary conversations to merge with bigger T-Mobile. The combined company would become the nation’s second-largest carrier with 99.1 million subscribers, according to Bloomberg Intelligence. It would rank ahead of AT&T and behind Verizon Communications Inc.
Son, a Japanese mobile phone mogul, has dangled before Trump a $50 billion investment pledge, possibly to sweeten his prospects for approval by an administration that claims more jobs and fewer regulatory hurdles as priorities.
Spokesmen for the FCC, the Justice Department, Sprint and T-Mobile declined to comment.
‘Cheaper and Better’
After officials fended off AT&T’s 2011 attempted takeover, T-Mobile flowered with record subscriber growth and cheap offerings that Verizon and AT&T were forced to match. Former antitrust chief Bill Baer said T-Mobile had “spearheaded” competition that helped consumers with “cheaper and better” contracts. Tom Wheeler, the FCC’s Democratic chairman under President Barack Obama, said that having “four national wireless providers is good for American consumers.”
Now that T-Mobile is profitable and the fastest-growing U.S. wireless carrier, a key question is whether a merger with Sprint -- which is under pressure after a decade of losses -- would make it stronger or hold it back. The combined company would control the most airwaves of any carrier, offering more network capacity for the streaming videos subscribers demand.
The stronger the combined company, the stronger the case it can make that the merger would enhance competition, said Feld. “You want a company like T-Mobile that’s competing hard.”
Delrahim lobbied against AT&T’s failed bid for T-Mobile on behalf of the Coalition for Mobile Wireless Competition. He wouldn’t have to recuse himself from a Sprint-T-Mobile deal under the Trump administration’s ethics rules, which require former lobbyists to shield themselves from matters involving former clients for two years. Delrahim hasn’t worked for the wireless coalition since 2011, according to Open Secrets.
Regulators should consider mergers such as Sprint and T-Mobile because the market is changing rapidly and in unforeseeable ways as the industry shifts to faster, so-called 5G services, said Jeffrey Eisenach, a visiting scholar at the American Enterprise Institute.
“You’d have to look at it in a very different context from the case three or four years ago,” Eisenach said in an interview. “It would get a more serious look than it got” under Obama-era officials.
Michael Copps, a former Democratic FCC commissioner, is concerned the agency’s could take a deregulatory path that could lead "to a Wild West mentality where everybody’s out for themselves, to corner markets and build a monopoly.” Copps is also a special adviser to Common Cause, a public interest group that opposes media consolidation.
— With assistance by Scott Moritz, and Bill Allison