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Analysts: T-Mobile's 'Uncarrier' News Didn't Sway Sprint Merger Critics

Mike Dano
11/8/2019

T-Mobile's "Uncarrier" announcement this week was geared toward gaining more support for its proposed merger with Sprint, according to some Wall Street analysts.

Was the operator successful in changing minds?

"Unlikely to preempt trial," summarized the analysts at Nomura's Instinet in a note to investors. They wrote that the group of state attorneys general that opposes the proposed merger between Sprint and T-Mobile probably won't be swayed by T-Mobile's latest promises, and that the trial will start in December as previously scheduled.

Others agreed.

"Fundamentally, the moves, while consumer- and regulator-friendly on the margins, do not address the competition harms that the state AGs have alleged in their complaint," wrote the analysts at New Street Research in their note to investors. "Perhaps a handful of litigating states will be placated, but we expect the lawsuit to move forward and these kinds of public interest benefits are unlikely to play any role."

The analysts at Raymond James offered a slightly more positive take: "We applaud these three Uncarrier moves and think some state AGs will be swayed off of the case, but still expect it is headed to trial."

Cowen's analysts said their odds on whether the transaction will ultimately close are holding at just 40%.

But that's not for lack of trying, at least on the part of John Legere and T-Mobile.

During its "Uncarrier" announcement this week, T-Mobile promised three different initiatives that offer free or discounted services to first responders, kids and prepaid users. "It almost sounds like the New T-Mobile [the company that would be created by the combination of Sprint and T-Mobile] is pitching an update to Motherhood, Apple Pie and the Flag," wrote the Raymond James analysts.

Nonetheless, opponents didn't hesitate to pounce on T-Mobile's newest announcement.

"We have a deep and genuine commitment to connecting first responders and using technology to enrich education, not marketing stunts contingent on getting something approved," an AT&T spokesperson told Cnet, adding that it's "critical to offer free access to these communities they would do it today, no conditions or questions asked."

More importantly, Cnet also reported that California's attorney general remains unswayed, and is moving forward with the lawsuit to stop the merger. "Our bottom line remains: protecting consumers and competition," Xavier Becerra told the publication.

Meantime, as reported by Law360, the US Department of Justice went to bat for T-Mobile. In a 55-page filing with the DC judge who is reviewing the agency's approval of the merger of T-Mobile and Sprint, the DoJ wrote that opponents of the deal "ignore the benefits to the public from this merger."

Finally, it's important to note that T-Mobile parent Deutsche Telekom may be preparing for a life without Sprint. As noted by the analysts at New Street, DT executives this week suggested that they are actively considering participating in US spectrum auctions next year. The analysts estimated that DT could be willing to spend $16 billion or more to acquire more spectrum for T-Mobile in the US.

A big part of the rationale for T-Mobile's proposed merger with Sprint is to acquire Sprint's vast 2.5GHz spectrum holdings. If T-Mobile is prevented from merging with Sprint, it would have to look elsewhere for more spectrum, including in any upcoming US spectrum auctions.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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