What wireless firms face in selling their merger

From the moment T-Mobile and Sprint announced their $26.5 billion merger on Sunday, the wireless carriers have positioned their proposed deal with an eye toward Washington. After all, regulators in the Obama administration blocked one of their previous efforts to combine.

This time around, the chief executives emphasized that merging would help them to:

⏩ Build a next-generation wireless network, one robust enough to keep up with China in a growing technological arms race.

⏩ Create thousands of jobs, especially in rural areas.

⏩ Keep prices low for consumers, especially as cable companies like Comcast try to enter the market.

Not everyone is convinced they’ll do everything. The heads of both companies began a charm offensive in Washington on Tuesday; here’s what three government agencies will weigh as they consider the bid.

Is the deal in the national interest? Ina regulatory filing on Monday, the companies acknowledged that they would need approval from the Committee on Foreign Investment in the United States. It is an intra-agency panel run from the Treasury Department that reviews mergers and can block them on national security grounds.

The reason for two U.S. carriers to need approval? T-Mobile, which is acquiring Sprint, is controlled by Deutsche Telekom of Germany. Sprint is mostly owned by SoftBank of Japan.

Deutsche Telekom and SoftBank had to undergo reviews by the committee when they bought control of their respective American wireless providers years ago, which suggests that any transfer of assets between the two now would pass muster.

But the Trump administration has recently taken a harder stance on foreign-owned acquisitions. It pre-emptively blocked Broadcom’s hostile bid for chipmaker Qualcomm. While Broadcom is based in Singapore, and had announced that it would relocate to the United States, the logic was that any change at Qualcomm could hamper its ability to help build out the next-generation wireless network, known as 5G, in the United States. The administration has also said it might consider nationalizing the 5G network, underscoring the sensitivity of the technology that underlies a merger between Sprint and T-Mobile.

Complicating matters are the business dealings of SoftBank. It has ties to Huawei and ZTE, two Chinese tech companies whose connections to Beijing have been a matter of controversy.

But Sprint and TMobile are likely to point out that each has already passed the committee’s review in the past, and are willing to make concessions to win over the panel now.

What’s in the public interest? The Federal Communications Commission has scrutinized a possible T-MobileSprint merger before.

In 2014, SoftBank’s founder, Masayoshi Son, met with the chairman of the FCC at the time, Tom Wheeler, and the Justice Department’s antitrust chief at the time, Bill Baer. Son’s goal: to convince the regulators that AT&T and Verizon were an oligopoly that had a stranglehold on the U.S. wireless market. The best way to combat that, Son argued, was by letting Sprint combine with T-Mobile.

Wheeler and Baer rejected the argument, concluding that effectively reducing the wireless market to three major carriers from four would not be good for consumers.

Sprint and T-Mobile are now betting that the new FCC chairman, Ajit Pai, feels differently.

One question is how the FCC will regard Sprint and T-Mobile’s argument that they need to fend off new players in the market. The carriers have pointed out that Comcast has begun bundling wireless service with cable television offerings, essentially by reselling access to Verizon’s network. Charter Communications is expected to unveil a similar service as well.

Will people pay higher prices? The biggest regulatory wild cards may be the Justice Department and its current antitrust chief, Makan Delrahim. Late last year, the Trump appointee sued to block AT&T’s $85.4 billion takeover of Time Warner, arguing that the combination would lead to higher prices for content from HBO and Turner Broadcasting channels.

Though corporate America assumed that a Trump presidency would be more lenient toward dealmaking, it has maintained an aggressiveness in regulating mergers, according to Norman Armstrong Jr., the co-head of the antitrust practice at the law firm King & Spalding.

“Overall I haven’t seen much change from the last administration to this one,” he said.