Technology

Sprint, T-Mobile merger ‘presumptively unlawful’ says union, consumers, telecom group

Sprint and T-Mobile have reached an agreement to merge

Sprint CEO Marcelo Claure and T-Mobile CEO John Legere announce that the two companies have reached an agreement to come together to form a new company - one that will deliver the first 5G nationwide network.
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Sprint CEO Marcelo Claure and T-Mobile CEO John Legere announce that the two companies have reached an agreement to come together to form a new company - one that will deliver the first 5G nationwide network.

Opponents of the proposed merger between T-Mobile and Sprint labeled it “presumptively unlawful” Thursday and launched a formal push to block the deal in Washington.

Led by Public Knowledge, Communications Workers of America, Dish Network and regional wireless carrier CSpire, the 4Competition Coalition reiterated complaints that the merger would reduce competition, raise prices, eliminate jobs and hurt rural consumers with no offsetting benefits in the public interest.

Consumers would be left with three “mega carriers” providing nationwide service, instead of the four national carriers competing now, said Phillip Berenbroick, senior policy counsel at Public Knowledge. He said it also would change the nature of the “so-called mavericks” who want government approval to merge.

“Their increased market share as a result of this deal would give them significant incentives and the ability to cooperate and collude with the other big carriers,” Berenbroick said during a conference call with reporters.

The Communications Workers of America, which represents employees at Verizon and AT&T but none at the merging wireless companies, has challenged the jobs impact of the deal. CWA’s analysis found more than 28,000 jobs could disappear, including 4,500 at Sprint’s and T-Mobile’s headquarters.

T-Mobile and Sprint have pitched the merger to the public and to regulators as creating jobs from the first day, lowering prices for consumers and allowing the merged company to build a 5G wireless network unrivaled worldwide.

The 13 groups that announced the coalition include several that sent a letter to two Democratic congressional leaders in late November seeking a hearing on the merger early next year. The letter cited the congressmen’s interest in the “potential effect of this merger on consumers, workers, and the communications market.”

The 4Competition Coalition said it waited to form until after the Federal Communications Commission closed its review process to filings from the public. It plans to lobby the FCC, the U.S. Department of Justice, Congress and state officials based on the evidence in the record.

The organized opposition comes as analysts have posted increasingly higher odds that Washington will approve the merger.

Analysts at Cowen Equity Research this week even shifted their financial forecasts for T-Mobile’s revenues, profits and other data to reflect a post-merger world.

Revenues will likely reach $43.3 billion this year, its report to clients shows, but surge to $63.8 billion during 2019 based on the merger being completed by July 1, 2019. Cowen’s forecast of revenues tops $82.6 billion in 2020, the first full year after the merger.

The report assumes the merger happens, but officially Cowen puts those odds at 75 percent.

Early last month, analysts at Oppenheimer set the odds for approval at 90 percent. And in late October, Wells Fargo equity analyst Jennifer Fritzsche bumped up her estimate of the odds to 70 percent from 60 percent.

Fritzsche cited a “fairly drama-free” review at that point.

“I think a lot of that is T-Mobile and Sprint spin and it’s being bought by the analysts,” said Debbie Goldman, research and telecommunications policy director for the Communications Workers of America.

Goldman said one analysis showed the stock prices of the two companies — linked by the terms of the deal — reflect only about a 36 percent chance of merger approval.

Nor do the analysts have access to confidential data about the merger that is part of the official review process, Goldman said.

The proposed deal has also faced opposition for other reasons.

A group called Protect America’s Wireless has recently targeted the merger in a campaign against foreign involvement in U.S. wireless networks. Its website has complained specifically about China-based equipment maker Huawei Technologies Co.

Those issues had come up in 2014, as Toyko-based SoftBank Group Corp. was seeking U.S. approval to buy Sprint and for Sprint to buy its network partner Clearwire Corp. They had pledged to remove Huawei equipment from Clearwire’s network.

They also agreed to add a “security director” to Sprint’s board of directors and gave the federal government approval over the individual chosen. The board seat is occupied currently by Stephen R. Kappes, a former deputy director of the Central Intelligence Agency where he served for 30 years.

SoftBank recently has been reviewing the impact of removing Huawei equipment from its wireless network in Japan, according to The Wall Street Journal.

Other members of the 4Competition Coalition are AFL-CIO, Common Cause, Fight for the Future, New America’s Open Technology Institute, NTCA-The Rural Broadband Association, Open Markets Institute, Rural Wireless Association, The Greenlining Institute, and Writers Guild of America-West.

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Mark Davis writes about business for The Kansas City Star with attention to Sprint, investing, the economy and scams. He has been a winner and finalist in national competitions held by the Society for Advancing Business Editing and Writing.

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