May 31, 2019

DOJ is said to want T-Mobile and Sprint to create a new competitor

The Department of Justice wants T-Mobil and Sprint to establish another wireless competitor with a dedicated network in order to win approval for their merger, per Bloomberg this week.

Why it matters: The story reveals key aspects of how regulators are thinking about the deal on which T-Mobile has bet its future growth.

  • The DOJ is reportedly leaning towards an analysis that finds that competition only exists in wireless when there are four competitors that each maintain their own network of coverage, rather than leasing one from another company.
  • The split is pronounced between DOJ’s approach, which by law focuses exclusively on how a merger will affect competition, and that of the FCC, which is already moving towards approving the Sprint/T-Mobile deal under its standard of whether a merger is in the “public interest.”
  • DOJ’s reported condition goes further than what T-Mobile and Sprint proposed to get FCC approval: selling off Sprint's Boost Mobile prepaid service. (Reuters reported on Thursday that Amazon is interested in buying the brand.)

A new competitor would need access to a credible brand, as well as access to wireless spectrum to build a network — although access to someone else's wireless network could be a stopgap until that was possible, Bloomberg notes.

Flashback: Previous regulators have drawn the line at moving from 4 to 3 wireless carriers.

The bottom line: If DOJ is serious about drawing that line again, then T-Mobile’s deal could be in trouble.

  • "I have a hard time seeing T-Mobile saying, ‘Well, that’s progress. I’ve strengthened my position in the marketplace but somebody has all these criteria so I’m still one of four,’” said Tom Wheeler, who was FCC chairman when regulators indicated to Sprint it shouldn't attempt a merger with T-Mobile.
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