Sprint Dropping Pursuit of T-Mobile Is a Big Win for Wheeler, Say Analysts, Former FCC Officials
The demise, at least for the time being, of Sprint’s buy of T-Mobile was good news for the FCC and Chairman Tom Wheeler, taking a potentially divisive issue off the table and removing some uncertainty leading up to the TV incentive auction, said analysts and industry officials Wednesday. Meanwhile, Sprint said Dan Hesse is being replaced as CEO by Marcelo Claure, 43, a member of the Sprint board and CEO of Brightstar (http://bit.ly/1mmVioO). Brightstar is a subsidiary of Japan’s SoftBank, which owns a majority of Sprint. Wheeler, who had signaled concerns about a Sprint/T-Mobile deal (CD July 22 p1), released a statement Wednesday, saying: “Four national wireless providers are good for American consumers” (http://bit.ly/1nsToT1). “Sprint now has an opportunity to focus their efforts on robust competition.”
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Bernstein Research analyst and former FCC official Paul de Sa said the agency benefits from the demise of a Sprint/T-Mobile, especially headed into the incentive auction. The FCC demonstrated that “despite the best efforts of its opponents ... it can still be a relevant institution, able to resist high-profile lobbying campaigns and ignore distractions such as auction promises and attempts to negotiate by press leak,” de Sa said in a research note.
The development is “a huge win” for Wheeler, said NAB Executive Vice President Rick Kaplan, who was Wireless Bureau chief during the review of the failed AT&T/T-Mobile. The expected Sprint/T-Mobile “would have further taxed the agency’s resources and likely harmed bidding in both the AWS-3 and incentive auctions,” he told us. “It was a major distraction the agency didn’t need.” Wheeler “threw up every roadblock he could think of leading up to Sprint filing, and the combination of them all appears to have been successful, to his credit,” he said.
The demise of the proposed deal takes a “major time and energy-consuming item off” the agency’s “to do list,” said former FCC Commissioner Robert McDowell. “It removes a lot of uncertainty regarding not only how the proposed transaction would have affected the incentive auction but how the commission would have tried to apply its new spectrum aggregation rules as well."
"I bet Wheeler is relieved that he dodged this bullet,” said Armand Musey, managing director at Goldin Associates. But Musey said other deals could be on the way before the incentive auction: “This is a very dynamic industry."
Wheeler’s “strong stand against this merger and against joint bidding” were “hugely important” for all broadcasters planning to participate in the auction, said Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition. Padden predicted all four national carriers, Dish Network and possibly others will “compete vigorously at high prices for what looks like the last block of prime, beachfront spectrum” that will be available for many years. After some stumbles, “this is a real win for the Wheeler chairmanship,” said a former FCC spectrum official who does not represent T-Mobile or Sprint: “They've caught a lucky break.”
Hesse has been CEO of Sprint since 2007 and for many of those years the company has had the highest churn rates and lowest net additions among the four national wireless carriers, industry observers said. But he had also been the public face of Sprint, appearing in TV ads for the company. Hesse, an AT&T veteran, was the successor to Gary Forsee, who oversaw Sprint’s successful buy of Nextel.
"While we recognize Sprint needs to turn the tide (quickly) in getting gross adds back in the door, we believe the Street under appreciates all it has done on the network side and the improvement in voluntary churn in markets where Network Vision” has been completed, said Wells Fargo analyst Jennifer Fritzsche.
BTIG analyst Walter Piecyk said Claure is a relative outsider who should be able to shake up the corporate culture at Sprint. “We would not rule out a renewed attempt by Sprint to buy T-Mobile in 2015, (even under the current FCC),” Piecyk aid in a research note. “However, there are multiple moving parts in the global telecom industry and it’s unclear if T-Mobile would still be independent at that time.”