Sprint, T-Mobile must convince antitrust regulators to allow merger
NEW YORK To gain approval for their US$26.5 billion merger agreement, T-Mobile and Sprint aim to convince antitrust regulators that there is plenty of competition for wireless service beyond Verizon and AT&T.
The deal announced last week would combine the nation’s third- and fourth-largest wireless companies and bulk them up to a similar size to Verizon and AT&T, the industry giants.
But the companies argued the combination would allow them to better compete not only with those two rivals but also with Comcast and others as the wireless, broadband and video industries converge.
“This isn’t a case of going from four to three wireless companies — there are now at least seven or eight big competitors in this converging market,” T-Mobile chief executive John Legere said in a statement. He would be the CEO of the combined company.
T-Mobile and Sprint have been considering a combination for years. But a 2014 attempt fell apart amid resistance from the Obama administration. In 2017, another potential deal fell through.
The combined company, to be called T-Mobile, would have about 127 million customers. Consumers worry a less crowded telecom field could result in higher prices, while unions are concerned about potential job losses.
In a conference call with Wall Street analysts, Sprint CEO Marcelo Claure acknowledged getting regulatory approval is “the elephant in the room.” One of the first things the companies did after sending out the deal’s news release was to call Ajit Pai, chairman of the Federal Communications Commission.
The companies stressed that they plan to have more employees following the combination, particularly in rural areas, than they do as stand-alone companies now.
They also said the deal would help accelerate their development of faster 5G wireless networks and ensure the U.S. doesn’t cede leadership on the technology to China.
And they said the combination would allow them to better compete with a growing number of competitors in a changing market.
Verizon and AT&T have been expanding their video-content businesses, while cable companies have been moving into wireless. That allows a single company to combine home and wireless internet and use content to support the communications businesses.
Comcast, the cable giant that finished buying NBCUniversal in 2013, offers customers wireless service by reselling access to Verizon’s network. So does another dominant cable company, Charter.
The all-stock deal values each share of Sprint at slightly more than 0.10 T-Mobile shares. Deutsche Telekom, T-Mobile’s parent, would own about 42 per cent of the combined company. Japan’s SoftBank, which controls Sprint, would own 27 per cent, and the remainder would be held by the public.
The companies said they expect the deal to close by the first half of 2019 and would result in about US$6 billion in annual cost savings.
The two companies were poised to combine in October, but the deal was called off after what analysts said was a disagreement over control of the combined company.