T-Mobile Tries To Save Its Unpopular Merger With A Few Concessions, But Nobody's Buying

from the ill-communication dept

Sprint and T-Mobile have been facing some increased scrutiny of their claim that merging and reducing the total number of major wireless competitors from four to three will be a wonderful thing for both consumers and the wireless market. New York and California regulators in particular have apparently been pushing back a little at the idea that more consolidation is what's needed in a largely consolidated and anti-competitive telecom sector:

New from @Capitol_Forum: California and New York antitrust enforcers are skeptical of T-Mobile and Sprint's claims about efficiencies their merger will bring; they're "asking for more evidence and data to back up those justifications for the deal." https://t.co/TN0VOAC39C — 4Competition Coalition (@4CompCoalition) January 15, 2019

You might recall that the companies' previous merger attempt was blocked in 2014 after regulators noted that removing one of just four major carriers would result in a proportionally-lower incentive to actually compete on price. That's really not debatable if you've paid attention to telecom and broadband industry history (it's a major reason why we all loathe Comcast). That's especially true in Canada, where consolidation to just three players has resulted in the highest mobile data prices in the developed world. AT&T's attempt to acquire T-Mobile in 2011 was blocked for the same reason, a move that many forget (some intentionally) resulted in T-mobile being more competitive than ever.

This week, T-Mobile attempted to salvage the deal by offering up a few concessions. In a letter to FCC boss Ajit Pai (pdf), T-Mobile CEO John Legere proclaimed that the agency should ignore critics of the deal, since they're "largely" employed by "big cable and big telco":

"Critics of our merger, largely employed by Big Telco and Big Cable, have principally argued that we are going to raise rates right after the merger closes. I want to reiterate, unequivocally, that New T-Mobile rates are NOT going to go up. Rather, our merger will ensure that American consumers will pay less and get more.

Of course that's nonsense. Every major consumer group (you know, the people paid very little to actually try and represent consumers) oppose the deal. And it's not just critics saying that greater consolidation in wireless will raise rates. It's history. You can, if the option is available to you, ask a Canadian how reducing the wireless sector's total carriers from four to three works out for both competition and the end user. This kind of rhetoric only exemplifies how T-Mobile's hip Millennial consumer advocate branding schtick only goes so far -- assuming T-Mobile's opposition to net neutrality and weird attacks on the EFF hadn't clued you into that fact already.

Legere goes on to promise Pai that the newly merged T-Mobile won't raise rates for a period of three years as a condition affixed to the deal:

"To remove any remaining doubt or concerns about New T-Mobile’s prices while we are combining our networks over the next three years, T-Mobile today is submitting to the Commission a commitment that I stand behind – a commitment that New T-Mobile will make available the same or better rate plans for our services as those offered today by T-Mobile or Sprint."

Right, but this is the same FCC that just had its authority over telecom operators completely gutted by a massive telecom industry lobbying campaign Legere supported. There's also zero indication coming from the Pai end that he'd have any interest in holding T-Mobile accountable were they to violate this agreement. Regulatory apathy is extremely common when it comes to actually enforcing merger conditions, and Pai worships at the altar of the (false) belief that mindlessly deregulating the broken telecom sector will somehow miraculously create more competition than ever.

Needless to say, critics of the deal aren't calmed much by a three year promise not to raise rates. The 4Competition Coalition, comprised of consumer groups and smaller mobile carriers (not a "big telco" or "big cableco" among them), was quick to issue a statement proclaiming that the promise meant less than nothing:

"Committing to not raise ‘rate plans’ for three years is an empty promise that does not provide any real price protection for consumers. In fact, T-Mobile’s announcement has confirmed exactly what their own data shows: The merger will eliminate wireless competition and increase prices for consumers. The company’s pledge is riddled with loopholes and ensures that any network improvements will allow them to justify higher monthly bills, effectively rendering the pledge meaningless."

Wall Street analysts, meanwhile, saw the Legere concessions as a sign of desperation. From a research note circulated by Wall Street firm New Street Research:

"The question for investors is whether this commitment is in indication that the deal is more likely or less likely to be approved. Count us in the less likely camp. We admit the clarified commitment could represent a concession that DOJ and/or FCC staff (or the White House) asked for in exchange for agreeing to support the deal. But we think that is unlikely for a number of reasons. First, generally when it comes to mergers, the first side to offer concessions is likely to be the side that is losing."

John Legere is entertaining enough that many have been willing to overlook the historical evidence that these kinds of deals are almost always bad for employees and consumers. If they value the health of the telecom sector and their wallet, they really shouldn't.

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Filed Under: ajit pai, competition, fcc, john legere, merger, mobile, rates

Companies: sprint, t-mobile