T-Mobile's UScellular deal enters election year politickingT-Mobile's UScellular deal enters election year politicking

T-Mobile was conspicuously absent from the list of companies supporting the Biden administration's efforts to extend the Affordable Connectivity Program (ACP) subsidy through the end of this year – or just beyond November's US presidential elections.

The move could be part of T-Mobile's strategy to generate regulatory support for its proposed merger with UScellular, according to one analyst.

"The voters will decide whether the [T-Mobile/UScellular] deal will be judged by Biden or Trump appointed officials. If Biden wins, we now think that a Democratic majority FCC may require a specific T-Mobile commitment to serve low-income households," wrote Blair Levin, a policy adviser to New Street Research and a former high-level FCC official, in a note to investors Monday. "So here, T-Mobile may be holding back from offering a more attractive package for low-income households ... until it needs it for approval of the deal."

Such political maneuvering comes as no surprise. After all, Levin pointed to a Washington Post article indicating that Comcast deployed essentially the same strategy amid its efforts to gain regulatory approvals for its purchase of NBCUniversal. 

Moreover, T-Mobile's leadership team is deeply familiar with the political machinations in Washington, DC. The company's former CEO came under fire in 2019 for staying at former president Trump's hotel while attempting to generate support for T-Mobile's proposed purchase of Sprint. That deal was ultimately approved.

The ACP equation

The Biden administration's ACP program officially ended on May 31. The program provided around 23 million low-income households with up to $30 per month in subsidies for telecom services. Those subsidies ultimately pumped billions of dollars into US telecom providers.

However, the White House announced on Friday that it scored agreements with 14 service providers to offer their ACP subscribers "and other eligible households a high-speed Internet plan for $30 per month or less, with no fees and data caps, until the end of 2024."

Participating providers include: Allo Fiber, Altafiber (and Hawaiian Telcom), Astound Broadband, AT&T, Comcast, Cox Communications, IdeaTek, Mediacom Communications, MLGC, Optimum, Spectrum (Charter Communications), Starry, Verizon and Vermont Telephone Company.

Levin, the New Street analyst, noted that T-Mobile was the only big telecom company absent from the list of service providers supporting the White House's efforts.

"If Trump wins, we don't think a low-income commitment will be part of the approval process but there may be other factors that affect the economics of the transaction," Levin wrote.

A tricky deal

Most analysts agree that T-Mobile could face troubles in getting regulatory approvals for its proposed $4.4 billion purchase of UScellular's spectrum and customers.

"The hardest part of the entire UScellular transaction is convincing the FTC and the FCC that it's in the public interest without giving up significant transaction value," wrote Jim Patterson of Patterson Advisory Group in his weekly newsletter.

After all, regulators in the Biden administration have been particularly wary of deals that would allow big technology companies to get bigger.

Another regulatory wrinkle: T-Mobile is hoping to purchase roughly 30% of UScellular's spectrum holdings, a transaction that could increase T-Mobile's total spectrum holding in some locations beyond the FCC's "spectrum screen."

"The question isn't so much whether T-Mobile needs the spectrum as it is whether they will be allowed to buy it," wrote the financial analysts at MoffettNathanson in a note to investors last month on T-Mobile's UScellular transaction.

The FCC's decidedly arbitrary screen was set up in 2004; it's designed to trigger an investigation by the FCC if an operator moves to purchase more than one-third of the total amount of spectrum available in a given market. However, the agency has rarely used the screen as a basis to prevent spectrum purchases.

The 800MHz angle

T-Mobile's spectrum efforts will be further complicated by the company's 800MHz auction process, scheduled to happen later this year.

The story of T-Mobile's 800MHz auction starts with its purchase of Sprint, which closed in 2020. To get that deal approved, the company inked a complex agreement with Dish Network that regulators hoped would position Dish to take the place of Sprint as a fourth nationwide wireless network operator in the US. As part of that agreement, T-Mobile agreed to give Dish roughly three years to purchase its unwanted 800MHz.

However, Dish's business is now careening toward bankruptcy, and the company has signaled that it probably won't be able to raise the funds necessary to buy T-Mobile's 800MHz licenses.

As a result, T-Mobile will now auction that $3.59 billion worth of 800MHz spectrum to others in the market. According to a recent report on the auction from research and consulting firm LYA, T-Mobile cannot sell the spectrum to any other national facilities-based mobile wireless network operator, unless approved by the government. That could represent a significant – but not impossible – barrier to overcome for Verizon and AT&T, if they were to bid for the 800MHz spectrum licenses.

But, if no company bids at least $3.59 billion for the spectrum, then T-Mobile will be allowed to keep the 800MHz spectrum licenses.

That latter scenario sets up a Catch-22 problem for T-Mobile, according to the LYA report. If T-Mobile is allowed to keep the 800MHz spectrum because there are no other viable buyers, it may have to divest the spectrum anyway if it exceeds the FCC's spectrum screen.