T-Mobile, Sprint Expected to Deploy 5G Separately as Regulators Take Up Deal

T-Mobile CEO John Legere said it will consider seeking a waiver if needed to participate in the high-band auctions. “Each company has its own opinion on whether they will participate in the millimeter-wave auctions,” Legere said. “You would expect that everybody in our industry would be highly interested.”

By the time the auction starts, the companies will likely have a good sense about FCC staff's preliminary take on their transfer application, which would let them make informed decisions on strategy, former officials said Tuesday. Historically, companies have to plan for the future regardless of whether a deal is approved, the former officials said: On every wireless merger there is always some technical and operational synchronization that needs to happen once it goes through. "The most important requirement is disclosure to the commission through the short form” applications, said a former spectrum official. “They can bid individually. They can bid jointly. They can be fairly creative as long as they disclose.”

“With the pace of change in wireless there is no perfect time for a merger, but it is a bit awkward now,” said Doug Brake, director-telecom policy at the Information Technology and Innovation Foundation, which endorsed the deal Tuesday. “Any deployments will have to be made with future integration in mind.” Brake said evolving technology makes integration easier: “All the vendors tout their interoperability and interworking.” Brake sees auction strategy as “tricky” and predicted the two carriers might apply for a waiver to bid jointly in the high-band auctions.

Sen. Ed Markey, D-Mass., wants a Senate Commerce Committee hearing “on the state of competition” in the wireless industry given T-Mobile/Sprint. Commerce should review the proposed deal to assess potential impact “on consumers, competition and innovation,” Markey said in a Tuesday letter to committee Chairman John Thune, R-S.D., and ranking member Bill Nelson, D-Fla. Several industry lobbyists and officials believe there will be hearings on the deal in both the House and Senate. House Commerce Committee Democrats sought a committee hearing Monday (see 1804290001, 1804300055 and 1804300057). The carriers “have exerted competitive pressures on their larger rivals” in the wireless sector, “helping drive down prices, eliminating harmful contract requirements, and making more expansive and consumer friendly data plans the norm,” Markey said: Market forces “that drive prices down and service quality up may be further weakened” if the deal is approved. Senate Commerce didn't comment.

The deal likely will “make the mechanics and timing of the first 5G auction more difficult,” predicted Harold Feld, senior vice president at Public Knowledge. “T-Mobile will certainly want to compete, but its relationship with Sprint will create complications if the merger is not consummated by the time the quiet period kicks in. … I expect that T-Mobile will try to structure some sort of firewall, but I would expect serious pushback by other bidders hoping to sideline T-Mobile.”

Michael Calabrese, director of the Wireless Future Program at New America, doesn’t anticipate problems for the companies on regulatory issues. “The company being acquired typically refrains from taking positions in conflict with the interests of the acquiring company,” Calabrese said. “In the case of T-Mobile and Sprint, I’m not aware of any spectrum or mobile competition issues where their positions differ materially. In recent years, the two companies have been aligned and often opposed to Verizon and AT&T on issues such as spectrum aggregation limits, incentive auction rules, millimeter band license transfers, and fair terms for wireline backhaul controlled by the telcos.” Sprint, with its extensive 2.5 GHz holdings, “has also been fairly inactive on spectrum policy” generally, he said: “I expect they will maintain their current regulatory agendas, which are largely in sync.”

On an earnings call Tuesday, which Legere joined from Washington, the CEO said he had a series of meetings at the FCC and plans meetings at DOJ. The meetings at the commission have gone “extremely well,” he said. “There are a lot more sessions here this week and next week.” Regulators have an “open mind,” he said. Legere said he has been stressing the number of jobs that will be added. “Our story is strong and I am extremely confident [the deal] will be approved,” he said.

Legere said on the earnings call T-Mobile will “rapidly build” the nation’s “first and best 5G network.” T-Mobile “will continue to be an aggressive disrupter, unafraid to challenge the status quo, and force the competition to respond,” he said. The carrier said it added 617,000 branded postpaid customers in Q1, capturing 93 percent of industry growth. Revenue rose 8.8 percent to $10.5 billion over the same quarter last year, but profit fell 4 percent $671 million. The carrier said it set a new postpaid low for churn at 1.07 percent. T-Mobile already has 200 MHz of high-band spectrum covering 100 million POPs, across seven of the top 10 U.S. markets, officials said.