DOJ Prepares To Sign Off On An Elaborate T-Mobile Merger Plan That Isn't Likely To Work

from the ill-communication dept

While the Pai FCC is chomping at the bit to approve T-Mobile and Sprint's competition and job killing mega-union, rumors have long been that many DOJ staffers remain highly skeptical about the purported benefits of the deal. After all, history routinely shows that when you reduce the number of overall competitors in the telecom space from four to three, the reduction in competition results in higher prices and worse service (go ask the Canadians or the Irish). Such mergers also pretty routinely are massive job killers, given there's a laundry list of support and middle management personnel who wind up being redundant.

To address the competitive impacts, the DOJ is prepared to sign off on a new, elaborate deal that would offload Sprint prepaid brand Boost Mobile and some spectrum to Dish Network in a bid to cobble together a viable, fourth competitor out of sticks and twine:

"Satellite-TV provider Dish Network Corp. has agreed to pay $5 billion for wireless assets in a deal with T-Mobile US Inc. and Sprint Corp., setting the stage for the Justice Department to approve the $26.5 billion merger of the mobile-phone carriers, according to people familiar with the matter.

After weeks of negotiations, the parties have hammered out an agreement under which Dish will pay about $1.5 billion for prepaid mobile businesses and roughly $3.5 billion for spectrum, said the people, who asked not to be identified because the details are still private. Under the terms of the deal, Dish can’t sell the assets or hand over control of the agreement to a third party for three years, the people said."

So one, understand that Dish has spent the better part of the last decade hoovering up valuable spectrum and doing nothing with it (with no real regulatory penalty). This was even something T-Mobile was quick to point out when Dish was initially offering objections to the competition-eroding deal. Dish isn't exactly a company known for following through on its promises. And even here, while the idea is Dish is supposed to be building a vibrant, fourth competitor to compensate for the deal's impact, you'll note that Dish is allowed to offload all of these assets three years from now.

Creating a viable, new fourth competitor will require a lot of regulatory hand holding and guidance to ensure that not only does Dish actually live up to its end of the bargain, but that the industry's remaining three competitors (T-Mobile, AT&T, and Verizon) don't engage in behavior that undermines the effort. Who is going to do this, exactly? Ajit Pai, the FCC head who has yet to hold any major player in the telecom space accountable for anything? A DOJ now led by a former Verizon executive? An FCC that just effectively neutered its authority over telecom at lobbyist behest?

Basically, the DOJ is pretending that cobbling together a new fourth competitors out of a bunch of scraps will compensate for the competitive impact of the deal. But in a sector that suffers from immense regulatory capture, there's very little chance this deal gets adequately shepherded to meaningful conclusion. A far simpler approach would have been to block the deal outright (protecting four competitors), forcing Sprint to simply find another suitor organically outside of the merger process (claims the company is on death's door have been highly exaggerated).

Granted that even with DOJ and FCC approval, the deal still faces several obstacles, not least of which being a coalition of state AGs that have filed suit to stop the deal.

Filed Under: competition, doj, fcc, merger, wireless
Companies: dish, sprint, t-mobile


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  • identicon
    Michael, 25 Jul 2019 @ 6:18am

    "After weeks of negotiations, the parties have hammered out an agreement under which Dish will pay about $1.5 billion for prepaid mobile businesses and roughly $3.5 billion for spectrum"

    I do not know how it took weeks of negotiations to come up with: "Dish will pay $5 billion now and in three years, T-Mobile will buy the phone business back for $1.8 billion and the spectrum for $4 billion"

    reply to this | link to this | view in chronology ]

  • icon
    DannyB (profile), 25 Jul 2019 @ 6:21am

    Isn't likely to work?

    Whether the merger 'works' depends on your definition of 'work'.

    Pai's FCC has a different definition of 'work'.

    reply to this | link to this | view in chronology ]

    • identicon
      Pixelation, 25 Jul 2019 @ 7:32am

      Re: Isn't likely to work?

      It will work perfectly, for the C levels at T-mobile and Sprint. Why would they care about anyone else?

      reply to this | link to this | view in chronology ]

  • identicon
    Mikey, 25 Jul 2019 @ 9:06am

    It is likely a better outcome than not doing

    While I am normally not a fan of these types of mergers, Sprint is circling the drain. They also have some excellent unused frequency. This keeps those frequencies away from AT&T and Verizon.

    If Sprint goes down the two big guys will outbid T Mobile and make it even worse.

    reply to this | link to this | view in chronology ]

    • icon
      Dan Neely (profile), 25 Jul 2019 @ 10:32am

      Re: It is likely a better outcome than not doing

      8 years ago people attempting to defend ATT's attempt to acquire TMobile were making identical arguments. It was only after being told "NO!" in no uncertain terms that TMobile underwent the revival that has resulted in it surpassing Sprint by a large margin.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 25 Jul 2019 @ 9:44am

    right

    who has the clear inherent ethical right and knowledge to decide whether any business merger should occur or not occur ?

    reply to this | link to this | view in chronology ]

    • identicon
      Pixelation, 25 Jul 2019 @ 10:12am

      Re: right

      Wrong. This isn't about ethics. Ask the CEO's, their job is to maximize profits for the company, ethics be damned. Without oversight, we will all become slaves of corporations, you included. The good of society is more important than corporations/profit, even though you Libtards think otherwise.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 25 Jul 2019 @ 10:26am

    Another poorly researched Karl Bode article.

    In 2018, Sprint lost more than 300k subscribers, raised its rates to try and meet projections, and still lost $1.9 billion dollars.

    What do you propose Sprint does, Karl?

    Let's hear your wonderful ideas to keep a company circling the drain afloat.

    Tax subsidies? Already received, and costing tax payers far more than they should given the losses suffered by Sprint 3 years in a row (may be more - I stopped at 2016).

    More advertising? Can you not hear me now? Not working!

    Lower prices? Uh...

    I know! Sprint can sell T-shirts! Lots and lots and lots of T-shirts!

    Your hyperbole of an anti-consumer dystopia is already upon us. There is no competition when the oligopolies at play already price gouge and fix against their customers.

    Sprint was no different.

    No matter how it's spun, there will be 3 left and there's not a damn thing anyone can do about it.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 25 Jul 2019 @ 10:52am

      Re:

      "In 2018, Sprint lost more than 300k subscribers, raised its rates to try and meet projections, and still lost $1.9 billion dollars."

      Why should I care? The only people who will suffer are the low paid workers who will lose their jobs no matter what these C-suite screwups do. These rich assholes do not give a hoot about anything but themselves, so why should I care about them? And do not give me that "but they will move and take their money with them" bullshit.
      Screw those guys.

      reply to this | link to this | view in chronology ]

  • icon
    TimK (profile), 25 Jul 2019 @ 10:38am

    Is this for real? Are they actually calling Dish a "carrier"? They own zero antennas. Zero equipment. They are nothing more than an MVNO. So what if they have bandwidth and potential. They will be selling access to T-Mobile. They are no more of a carrier than WalMart. And saying "they have 3 years to build a network".....oh, sure, they will magically build a coast to coast 4G (what about 5G??) network in 3yrs that will compete with ATT and VZW (and T-Mo/Sprint). This whole agreement is based on what Dish COULD do and not what Dish IS.

    reply to this | link to this | view in chronology ]

  • icon
    ECA (profile), 25 Jul 2019 @ 1:04pm

    Its fun to watch..

    Over the years Iv watched from around 2000...
    As multiple companies are bought and traded back and forth, of the game of Hide the Pea..
    WHO owns whom? Take 10 companies and 4 major players. and Shuffle it all around, and Who buys Whom was Guessing who would be bought next.
    Its an interesting game, as the Tax department cant figure out WHO pays what..(love the IRS with a computer older than I am)

    Anyone wish to Volunteer to UPDATE THE IRS??? so they can tell where the money is going??
    No???
    Ok..

    reply to this | link to this | view in chronology ]


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