If DOJ Demands More Divestitures, T-Mobile/Sprint Seen Facing Tough Choice
It’s not clear how workable it is for T-Mobile and Sprint to sell off enough assets to start an additional, fourth national carrier, if that becomes a condition to win DOJ approval for their proposed combination, observers said Thursday. It's not clear whether rumors that Justice wants to preserve four national carriers are real or more of a way for Antitrust Division Chief Makan Delrahim to add to his leverage in negotiations with the two companies.
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.
The only two “remotely feasible options” to create a fourth network are Dish and a cable operator, said MoffettNathanson’s Craig Moffett. “From what I can tell, cable isn’t terribly interested. That leaves only Dish. I can certainly imagine that [Chairman] Charlie Ergen would see this as a high leverage opportunity to at least explore his options. But whether there’s enough there for a deal that satisfies everyone involved is anyone’s guess. I agree that it’s a heavy lift.”
“We think a remedy that allows the deal to proceed is possible but note there is a catch in any deal that is struck,” New Street’s Blair Levin wrote investors. “If the new competitor has assets greater than Sprint has today, what is the advantage to T-Mobile?” There are only “a limited number of candidates who, with limited conditions” could become a fourth carrier, Levin said. They include Dish and cable, provided they could rely on a mobile virtual network operator “sufficient to provide time to build out the remaining elements of a terrestrial mobile network,” he said: “Amazon, Google, and Facebook would qualify if the deal included spectrum and again, an MVNO sufficient for the time necessary to build out.”
“It's a tough ask,” said Roger Entner of Recon Analytics. “Spectrum, network equipment, fiber and customers would have to be given to the fourth carrier.”
In DOJ’s 2011 legal filing trying to block AT&T’s proposed buy of T-Mobile, the department discussed the difficulty of starting a network as a new wireless competitor. “To replace the competition that would be lost from AT&T's elimination of T-Mobile as an independent competitor, moreover, a new entrant would need to have nationwide spectrum, a national network, scale economies that arise from having tens of millions of customers, and a strong brand, as well as other valued characteristics," DOJ said then.
Meanwhile, Sprint said Thursday it’s now offering 5G service in parts of Atlanta, Dallas-Fort Worth, Houston and Kansas City. “In the coming weeks, Sprint also expects to launch service in areas of Chicago, Los Angeles, New York City, Phoenix and Washington, D.C., covering approximately 2,180 square miles and 11.5 million people total across all 9 market areas,” Sprint said. The company’s service uses its 2.5 GHz holdings.
The Rural Wireless Association told the FCC Thursday it shouldn’t be taken in by commitments the companies made to win its approval (see 1905200051). “Having the spectrum necessary to provide 5G services and having the infrastructure to ensure those 5G services actually reach consumers are two entirely different things, and while the Applicants individually possess spectrum that could be used to provide 5G coverage, they totally lack the cell sites, fiber, and backhaul services that are necessary to make a 5G network operational in 99 percent of rural America,” RWA said in docket 18-197. RWA estimated it will cost at least $100 billion for the new T-Mobile to cover at least 99 percent of the U.S. population with low-band 5G and 88 percent with mid-band, within six years. T-Mobile didn't comment.