Earlier this week, Sprint and T-Mobile announced new conditions to their proposed merger that included specific assurances that the combined company wouldn't be able to renege on Sprint's existing deal with cable company Altice.
However, those conditions haven't yet made Altice a supporter of the merger.
In fact, officials from Altice on Thursday of last week met with a number of FCC officials to reiterate the company's opposition to the proposed merger of Sprint and T-Mobile. The company said it would only support the merger if the merged company -- dubbed "New T-Mobile" -- agreed to honor its existing MVNO agreements. Further, Altice said New T-Mobile should also offer "the best wholesale terms and conditions that are offered individually by each of the [merger] Applicants to their MVNO partners, with a presumption of long term renewals and, if requested, offer the improved nationwide coverage and service offerings of the New T-Mobile to all existing MVNO partners of the Applicants."
However, that's not quite what Altice received from Sprint and T-Mobile in their new merger conditions. As the companies wrote in a filing to the FCC, "Applicants now commit that New T-Mobile will not exercise any termination rights under Altice's MVNO agreement with Sprint that might be triggered by the merger. In addition, New T-Mobile commits to engage in good faith negotiations to expand the existing Sprint/Altice agreement to the New T-Mobile 5G network."
When questioned about the situation this week, including whether Altice now supports the merger with its new conditions, Altice officials declined to comment beyond the company's FCC filings.
Altice's silence on the topic is noteworthy considering the chairman of the FCC, Ajit Pai, now supports the merger of Sprint and T-Mobile under the newly structured deal. Among the new conditions that T-Mobile and Sprint agreed to is a sale of Sprint's Boost prepaid business, as well as an expanded 5G network buildout.
Altice, for its part, said it remains on track to launch an MVNO through Sprint this summer.
DoJ still silent
Although Sprint and T-Mobile now have support from the FCC for their proposed merger, they still don't have sign-off from the Department of Justice. According to a Bloomberg report, staff at the DoJ remain mostly opposed to the merger.
Importantly, the analysts at MoffettNathanson argued that there's little evidence that the DoJ will support the merger, even if the chairman of the FCC supports it.
"The DoJ and the FCC usually concur on these kinds of deals; it's a bad look when they don't. In fact, the two agencies work quite closely together, sharing both information and preliminary conclusions," the analysts wrote in a recent note to investors. "But we should not assume that FCC approval guarantees DoJ approval. During a Q&A last week at the ACA Connects Summit, DoJ Antitrust Chief [Makan] Delrahim pointedly said that he is perfectly comfortable with the DoJ disagreeing with the FCC on merger reviews, as the two have entirely different mandates."
The Wall Street analysts at MoffettNathason explained that the DoJ uses the Herfindahl-Hirschman index (HHI) to measure market concentration. If a market is too concentrated -- if there aren't enough competitors in a given market -- then the DoJ will move against a proposed merger on the grounds that it creates an antitrust problem. The firm said that if a proposed transaction registers an HHI of 2,500 or more, the transaction is presumed to harm competition and therefore should not be allowed.
The firm calculated that the merger of Sprint and T-Mobile -- without accounting for the companies' new conditions -- would result in an HHI score around 4,500. That number is far more than would be allowed under the HHI model.
"It is relatively clear that divesting Boost doesn't come close to solving the HHI problem," the firm wrote. "That is presumably part of the reason DoJ staff reportedly remains opposed to the transaction. And, again, it is part of the reason why the legal hurdle for state AGs to file to block the transaction is lower than it would otherwise be."
The analysts at MoffettNathanson concluded that "none of this means that the DoJ will end up opposing the merger," adding that "there is no way to predict the outcome."
As a result, Sprint, T-Mobile and the rest of the industry are left to peer into whatever crystal ball they find appealing.