Critics Charge That T-Mobile/Sprint Merger Would Raise Wireless Bills, Eliminate Jobs
John Legere, T-Mobile’s trash-talking chief exec, claimed Friday that the $26.5 billion union of his company and Sprint is a “pro-consumer, pro-competition” deal.
His comments came after proposed merger was OK’d by the Justice Department with the requirement that the new company sell wireless assets to Dish Network, on the theory that this would establish a brand-new competitor in the market.
But consumer advocates expressed serious doubt about whether the deal does anything except knock out an existing competitor — Sprint — to the detriment of consumers while also inevitably eliminating thousands of industry jobs. (Legere boasted of $43 billion in cost-savings through T-Mobile’s takeover of Sprint.) T-Mobile and Sprint have pledged to not raise prices for three years, but industry observers say that represents only a short-term protection even if the newly merged company carries through on the promise.
“The merger would harm all wireless users through higher prices and diminished competition between the remaining three national carriers,” S. Derek Turner, research director as consumer-advocacy group Free Press, said in a statement.
The deal is not fully cleared yet: A lawsuit seeking to block the merger, filed by 14 states attorneys general, is still pending.
There’s plenty of skepticism about whether Dish will really represent a strong No. 4 competitor in the U.S. wireless market against the AT&T, Verizon or the new T-Mobile (with which Dish has a seven-year mobile virtual network operator agreement).
“Dish has never shown any inclination or ability to build a nationwide mobile network on its own and has repeatedly broken assurances to the Federal Communications Commission about deployment of its spectrum,” the office of New York Attorney General Letitia Moore said in a statement.
Critics also noted that there’s a built-in conflict of interest in setting up Dish to be dependent on the new T-Mobile. “The deal depends on T-Mobile giving a sustained, reliable assist to its new competitor as it tries to get established. Fundamentally, T-Mobile has no interest in doing that,” said George Slover, senior policy counsel for Consumer Reports. “If the past history of mergers is any indication, it will quickly look for ways to get around that promise.”
Meanwhile, Dish had previously lobbied against the T-Mobile/Sprint merger, arguing it would harm competition, as Free Press’ Turner pointed out. “Dish executives were against this merger before they were for it,” he said. “The fact that they’ve carved out a windfall for their company now does nothing to change the analysis they correctly put into the FCC record on this deal’s many harms.”
Some observers, however, bought into the T-Mobile/Sprint justification for the deal in arguing that it would more quickly produce a strong 5G network provider to rival AT&T and Verizon.
“The merged company would likely mean three, instead of two, 5G options for consumers in the future and a leg up for U.S. standards to become the default in the new technology,” said Jessica Melugin, associate director for technology and innovation at Competitive Enterprise Institute, a libertarian think tank.
As for the remaining legal challenge to the T-Mobile/Sprint merger, some Wall Street analysts don’t see it as a major threat that would kill the deal. T-Mobile “still must resolve the state lawsuits, but we don’t see this as a major problem given the DOJ will not be joining the state’s side,” CFRA Research analyst Keith Snyder wrote in a research note.
Shares of T-Mobile closed up 5.4% and Sprint climbed 7.4% Friday after the DOJ approval of the deal was announced. Dish inched up 0.8% for the day after dropping 9% earlier in the week on reports the the Justice Department clearance was imminent, because now that Dish has concrete plans to become a facilities-based wireless provider its spectrum holdings are valued as operating assets rather than as potentially salable assets.
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