Fourteen Takeaways From the Sprint/T-Mobile Merger Hearings

Mike Dano
2/13/2019

Anyone looking for informed insights, compelling debate or combative fireworks from this week's House hearing on the proposed Sprint and T-Mobile merger walked away mostly empty-handed.

Instead, both supporters and opponents of the proposed transaction mostly rehashed arguments on whether Sprint and T-Mobile should merge, while lawmakers either asked irritatingly inane questions ("What's this 5G I keep hearing about?") or obviously rhetorical questions geared toward their respective political bases ("Won't this corporate mega-merger just make the rich richer?" for the progressives and "Won't this transaction result in more opportunities for businesses and economic growth?" for the conservatives). I'm paraphrasing here, but this really isn't too far from what was said.

Also, the answers to the above questions -- from both sides of the issue -- were equally dreary, rote and predictable.

My favorite line of questioning during the House Energy and Commerce Committee's hearing, which was repeated almost verbatim several times during the three-hour event, involved whether the combined company would improve coverage in rural areas. The exchange invariably involved a representative from a rural area complaining about how there are big dead spots in their district, to which T-Mobile's John Legere or Sprint's Marcelo Claure would immediately boast about how a merged company would be able to fix that, yessir. (The truth is that carriers generally only build coverage in locations where they can make money from it. If there are one or two people using a cell tower, there's no way to recoup the cost of building that tower.)

To be clear, there were a few noteworthy and vaguely interesting exchanges. For example, T-Mobile's John Legere scored a few points against one of his opponents, Chris Shelton of the Communications Workers of America union, by talking about the company's acquisition of MetroPCS and the job growth and services that created. On the other hand, Legere remained mostly tongue-tied during questions about what happens in European countries when the number of providers is reduced from four to three (Public Knowledges Phillip Berenbroick, an opponent of the deal, happily stepped in to point out that prices generally rise in those situations).

The result of the hearing -- the first of two; another in the House Judiciary Committee is scheduled for Thursday -- is that just about everyone walked away from the hearing having successfully scored some points while absorbing others. And none of it really mattered much anyway because the House -- and in fact, all of Congress -- doesn't have a direct say in whether the transaction is approved or not. That falls on the FCC and Department of Justice, which continue to review the transaction and haven't indicated which way they're leaning.


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"We think the audience for the opposition (and therefore the companies as well) is not the DoJ staff, where economists are more persuasive, or the FCC, which is highly likely to simply follow the DoJ, but the states' attorneys general and the public," wrote the analysts of Wall Street firm New Street Research of the House hearings. The firm pointed out that a number of states' attorneys general may file suit against the merger if it is approved.

So what to take away from this particular episode of political theater? Not much, really. But below are some mostly random developments during the course of the past week or so -- separated into three categories -- that at least show that there is continued interest in the transaction, and that the ultimate outcome still isn't clear.

Good developments for proponents of the deal:

  • T-Mobile's John Legere said that the combined company won't use equipment from Chinese vendors like Huawei and ZTE. "Not today, not tomorrow, not ever," he said. Opponents though pointed out that Sprint and T-Mobile's parent companies -- SoftBank and Deutsche Telekom, respectively -- aren't making the same promise.
  • T-Mobile promised to expand the availability of Lifeline services for poor people if it is able to merge with Sprint.
  • House Energy and Commerce Committee member Rep. Anna Eshoo from California said she supports the deal.
  • J. Kenneth Blackwell, a former domestic policy advisor to the Trump Presidential Transition Team and former Treasurer of the State of Ohio, said the transaction is a "unique opportunity that will bring the benefits of the digital economy to more Americans, especially in rural and underserved communities, while at the same time creating jobs."
  • Regulators in New York signed off on the deal, but those in California have not done so.
  • Good developments for opponents of the deal:

  • Incompas, a trade group that represents some telecom operators, came out against the merger.
  • Democratic Sen. Elizabeth Warren of Massachusetts and Rep. Pramila Jayapal of Washington state questioned T-Mobile over John Legere's repeated stays at the Trump hotel in Washington, D.C., as to whether executives were trying to curry favor with the White House. Sprint and T-Mobile executives are no longer staying at the Trump hotel.
  • A new letter from 16 Minnesota community, advocacy and civic organizations to the DoJ and FCC worries over the merger's effects on jobs and prices, and argues it "should be opposed."
  • A group of Senators, including presidential candidates Sens. Amy Klobuchar of Minnesota, Kirsten Gillibrand of New York, Elizabeth Warren of Massachusetts and Cory Booker of New Jersey, signed a letter against the merger.
  • The Communication Workers of America union issued a report that states that T-Mobile's recent acquisition of Iowa Wireless (iWireless) harmed customers and lead to job cuts.
  • Executives from cable company Altice met with FCC staffers and reiterated the company's concerns that a merger between Sprint and T-Mobile would reduce the options the company has for MVNO deals.
  • Developments that weren't necessarily good for either side:

  • Sprint's Michel Combes reiterated at a Sprint town hall that he believes the deal will close in the first half of this year, despite the government shutdown. "The shutdown has maybe postponed by a few weeks, so we are always told that the, let’s say the closing should occur in Q2. We were more leaning for the beginning of the quarter, that maybe now is more for the end of the quarter, but we remain more or less ballparked in the same type of timing. Of course, nothing is done. Until the very last day nothing is done. But looks like that at least the story we are presenting is compelling and that everyone gets the interest for the country for the two companies, for the competition, for the employment, for the jobs, which might be created to put those two companies together. So that is where we stand," he said.
  • Dish Network continues to argue that John Legere's pledge not to raise prices for consumers for three years after the close of the merger is full of loopholes and won't hold up. And T-Mobile continues to argue that Dish suffers from "generalized misconceptions."
  • Top staff from T-Mobile met with the chairman of the FCC a few days before the hearing to again push their case at the agency.
  • If you're tuning in to tomorrow's hearing, plan to take shots every time you hear "race to 5G."

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

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    Clifton K Morris
    Clifton K Morris
    2/14/2019 | 2:06:35 PM
    More 36-month contracts?
    Sounds like this merger is all about a reduction in competitiors whose business models rely on heavily subsidized handsets. I expect phone prices to go up because T-Mobile won’t have to increase contract lengths to 36-month contracts in order to offer an iPhone at a $40 price-point in order to remain competitive and relevant.

    Either way, this merger MUST be approved at face value so Verizon and AT&T can use it as justification for their merger in the upcoming years.