T-Mobile’s Sprint acquisition is not out of the woods yet

News

Oregon joins in to make it 15 states fighting to block the merger; FCC severely criticised for untimely approval.

The State of Oregon joined a lawsuit, led by the states of California and New York, that aims to stop T-Mobile US acquiring Sprint to form a third national mobile operator more able to rival their much bigger rivals AT&T and Verizon.

They fear the move is anti-competitive and will ultimately result in less choice and higher prices.

About half the population of the US lives in the 15 states involved in the action so far.

Oregon’s Attorney General, Ellen Rosenblum, was quoted saying, “If left unchallenged, the current plan will result in reduced access to affordable wireless service in Oregon, and higher prices. Neither is acceptable”.

It is expected that the court course will be held in December: the protracted process has forced to T-Mobile US and Sprint to keep pushing back the deadline for completion.

The deal is critical to Sprint, which has been described by some of having little chance of prospering without the merger with T-Mobile, while T-Mobile’s parent company, Deutsche Telekom (DT), is looking to its US subsidiary as a major engine of growth.

T-Mobile US is star of DT’s show

In its Q2 reported earnings last week, DT reported good results with growth in sales in all its main businesses except the T-Systems IT unit, which undergoing restructuring. Hence overall sales rose 7.1% to nearly €19.7 billion. Earnings (before interest, tax, depreciation and amortization) were up 20%, to €6.7 billion, compared with the same period last year.

However, T-Mobile US was, as usual, the star of the show. It had 83.1 million subscribers at the end of June and saw revenues increase 5.1%, to $11 billion, compared with the same period in 2018. In comparison, the “organic” growth rate was 3.2%, attributed in Europe to takeovers in Austria and the Netherlands.

Without the drain of last year’s arbitration dispute, its year-on-year net profit rocketed by 90.7%, to €900 million in the same period.

Insufficient remedies

To win approval for the deal from the US Department of Justice in July, the companies had to agree to various remedies to address anti-competitive concerns. They included selling Sprint’s prepaid business to pay-TV provider Dish Network.

The states expect their case to be heard in court in December.

The litigious states are not the only critics of the T-Mobile US-Sprint deal.

The Wireless Internet Service Providers Association and the Rural Wireless Association (RWA) are arguing that the deal backed by Ajit Pai, Chairman of the US telecoms regulator, the Federal Communications Commission (FCC), in May, was materially different to the terms and conditions submitted for public scrutiny.

Pai’s opponents are saying that the public should have a chance to comment on the revised deal the FCC struck with the operators: the two had agreed to certain rural coverage targets and divestiture of various assets.

Further comment needed
In a statement, RWA’s General Counsel, Carri Bennet, said the FCC was “so hell bent on 5G that it is missing the bigger picture”.

She said she would appeal any approval if the FCC doesn’t allow further opportunities for the public to make their views felt.

FCC Commissioner Geoffrey Starks has called for further public comment on the grounds that the deal was not the same as that put to the public months ago.