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

Deals

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