economics

Antitrust Chief Discusses Sprint, Doesn't Close Door on Deal

U.S. Justice Department antitrust chief Makan Delrahim, who is leading a review of the proposed $26.5 billion merger of T-Mobile US Inc. with Sprint Corp., says the elimination of one major competitor in wireless service isn’t necessarily a deal killer.

The law and market economics will be the crucial factors, Delrahim said Friday, answering whether the U.S. would now allow the number of major players in mobile phone service to shrink to three from four now.

“I don’t think there’s any magical number that I’m smart enough to glean about any single market,” he told reporters following a speech at the Council on Foreign Relations in Washington.

Delrahim’s comment echoes the position taken by Federal Communications Commission Chairman Ajit Pai last year and marks a reversal of the stand that regulators outlined under the Obama administration. Their insistence on a four-player market made a potential Sprint/T-Mobile merger a non-starter in 2014.

But the absence of a line in the sand this time probably doesn’t throw open the doors to wireless consolidation. The Justice Department still must weigh the potential impact of allowing a merger of T-Mobile and Sprint, the No. 3 and No. 4 players, against having two smaller players battle on price and features against giants like Verizon Communications Inc. and AT&T Inc.

For example, by dangling offers like unlimited data and free video streaming, T-Mobile attracted 6.3 million new regular subscribers in the past two years. That’s a significant gain compared with the 4.8 million combined customers that Verizon and AT&T added.

Sprint and T-Mobile also argue the market is bigger than four companies thanks to new competition from cable companies like Comcast Corp.

Investor Skepticism

Investors have shown they’re skeptical the deal will be approved, with Sprint shares trading more than 11 percent below the value of the all-stock deal, based on current prices. Some analysts have given the transaction 50-50 odds of passage.

T-Mobile, based in Bellevue, Washington, rose 1.8 percent to $56.72 Friday in New York, while Sprint, headquartered in Overland Park, Kansas, gained 1 percent to $5.19. T-Mobile is offering 0.1026 share of its stock for each of Sprint’s.

“If economics dictate that a particular transaction violates the antitrust laws that’s what they do,” Delrahim said.

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