T-Mobile-Sprint Deal Runs into Resistance from DOJ Antitrust Staff(wsj.com)
wsj.com
T-Mobile-Sprint Deal Runs into Resistance from DOJ Antitrust Staff
https://www.wsj.com/articles/t-mobile-sprint-deal-runs-into-resistance-from-doj-antitrust-staff-11555446461
29 comments
That's unexpected. Given all the mergers that seemed clearly bad for consumers lately, I figured the current administration was basically "rubber stamping" everything.
The article was clearly careful to attribute this to "DoJ staff". Barr is new to the job, quite busy with (heh) other business at the moment, and the antitrust division is hardly going to be near the top of any AG's priority list.
Add to that the Journal's current editorial bent and I read this as an attempt to get Barr's attention to overrule the bureaucrats, frankly.
Add to that the Journal's current editorial bent and I read this as an attempt to get Barr's attention to overrule the bureaucrats, frankly.
if they deny it the only possible reason is to f--k foreign (in particular german) companies to favor US ones. sprint is practically dead now and t-mobile is doing fine but they would certainly be more competitive and would be able to offer a more competitive wireless market to consumers if they had deeper capital and a larger customer base for the transition to 5G.
John Legere is denying the story https://www.cnet.com/news/t-mobiles-john-legere-denies-justi... so we will see. The WSJ story could just be an attempt to sabotage the deal by introducing uncertainty.
John Legere is denying the story https://www.cnet.com/news/t-mobiles-john-legere-denies-justi... so we will see. The WSJ story could just be an attempt to sabotage the deal by introducing uncertainty.
Doubtful, T-Mobile has shown it is quite profitable without Sprint, taking on Sprint's debt and assets will force T-Mobile to act like a classic telecom company much moreso than they already do.
T-Mobile is only interested in buying Sprint for their 120Mhz of 2.5ghz spectrum, as they would be able to use that to build a 5G network with much wider spacing (similar to Clearwire's spacing every 16 blocks) versus Verizon and AT&T who will need to place radios every 2 to 3 blocks using mmWave spectrum (and mmWave won't work indoors either).
Sprint and T-Mobile could easily come to a network sharing agreement where T-Mobile builds out 2.5Ghz and Sprint can use the network, similar to Telus/Bell in Canada. This would be a much more reasonable option than merging and losing the only carrier (Sprint) that has consistently provided downward pressure on cell plan prices.
T-Mobile is only interested in buying Sprint for their 120Mhz of 2.5ghz spectrum, as they would be able to use that to build a 5G network with much wider spacing (similar to Clearwire's spacing every 16 blocks) versus Verizon and AT&T who will need to place radios every 2 to 3 blocks using mmWave spectrum (and mmWave won't work indoors either).
Sprint and T-Mobile could easily come to a network sharing agreement where T-Mobile builds out 2.5Ghz and Sprint can use the network, similar to Telus/Bell in Canada. This would be a much more reasonable option than merging and losing the only carrier (Sprint) that has consistently provided downward pressure on cell plan prices.
Profitable, but still only $40B in revenue compared to $126B for Version, and only $4B net profit compared to $30B for Verizon. Verizon's net profit is closer to T-Mobile's total revenue. https://s22.q4cdn.com/194431217/files/doc_financials/2017/an... https://www.verizon.com/about/sites/default/files/2017Verizo...
That is not a sustainable competitive position in a capital intense industry.
Spectrum is part of the deal but hardly the only one. Retail consolidation would be a big cost savings. Refinancing Sprint's debt ($40B) with T-Mobile's better credit ratings would save hundreds of millions per year in interest expenses. CAQ for mobile customers is very high, so Sprint's customer base is worth quite a bit.
The really important question is how the deal will affect the competitive landscape for 5G. Neither Sprint or T-Mobile have the scale to effectively compete on 5G and Sprint in particular is in bad shape due to their low credit ratings and high borrowing costs. If T-Mobile doesn't merge with Sprint, either a larger company does, or Sprint continues to circle the drain with low-value services and slowly dies.
If Sprint loses customers then all else being equal this benefits AT&T/Verizon more because, if those customer migrate in proportion to existing market share, they get more of them. So Sprint going down weakens T-Mobile's competitive position.
Whether or not merging with Sprint actually improves T-Mobile's competitive position depends on execution but there is at least a plausible story there.
At this stage of the industry the opportunities for competition at the infrastructure level are limited and regulators should be focused more on maintaining a competitive market for MVNOs that are offering differentiated products like Google Fi and cheap pre-paid options like Mint.
That is not a sustainable competitive position in a capital intense industry.
Spectrum is part of the deal but hardly the only one. Retail consolidation would be a big cost savings. Refinancing Sprint's debt ($40B) with T-Mobile's better credit ratings would save hundreds of millions per year in interest expenses. CAQ for mobile customers is very high, so Sprint's customer base is worth quite a bit.
The really important question is how the deal will affect the competitive landscape for 5G. Neither Sprint or T-Mobile have the scale to effectively compete on 5G and Sprint in particular is in bad shape due to their low credit ratings and high borrowing costs. If T-Mobile doesn't merge with Sprint, either a larger company does, or Sprint continues to circle the drain with low-value services and slowly dies.
If Sprint loses customers then all else being equal this benefits AT&T/Verizon more because, if those customer migrate in proportion to existing market share, they get more of them. So Sprint going down weakens T-Mobile's competitive position.
Whether or not merging with Sprint actually improves T-Mobile's competitive position depends on execution but there is at least a plausible story there.
At this stage of the industry the opportunities for competition at the infrastructure level are limited and regulators should be focused more on maintaining a competitive market for MVNOs that are offering differentiated products like Google Fi and cheap pre-paid options like Mint.
> T-Mobile is only interested in buying Sprint for their 120Mhz of 2.5ghz spectrum
Sprint is the one doing the buying. Rather, Softbank.
If T-Mobile wanted to acquire a cheaper shitbag company for spectrum, there's no better target than DISH since they have been squatting on 75mhz of AWS-3 nationwide with nothing to show for it.
But DISH's spectrum situation is going to time out next year and then we will see if the FCC actually does anything.
Network sharing won't happen. Sprint built a weird network, they are already doing an upgraded 2500mhz deployment supporting the 5G stuff as well as their current TDD-LTE devices: https://news.samsung.com/us/sprint-samsung-5g-ready-massive-...
FYI, if this plan falls apart Sprint gets a T-Mobile roaming deal out of it. Who knows what the cost is though. AT&T charged TMUS like $17/MB to roam in early days of their breakup deal on B-IV WCDMA.
Sprint is the one doing the buying. Rather, Softbank.
If T-Mobile wanted to acquire a cheaper shitbag company for spectrum, there's no better target than DISH since they have been squatting on 75mhz of AWS-3 nationwide with nothing to show for it.
But DISH's spectrum situation is going to time out next year and then we will see if the FCC actually does anything.
Network sharing won't happen. Sprint built a weird network, they are already doing an upgraded 2500mhz deployment supporting the 5G stuff as well as their current TDD-LTE devices: https://news.samsung.com/us/sprint-samsung-5g-ready-massive-...
FYI, if this plan falls apart Sprint gets a T-Mobile roaming deal out of it. Who knows what the cost is though. AT&T charged TMUS like $17/MB to roam in early days of their breakup deal on B-IV WCDMA.
> Sprint is the one doing the buying. Rather, Softbank.
It is a merger, but Softbank will get a smaller stake than DT. "The new company will be about two-thirds owned by T-Mobile shareholders and one-third Sprint, with board representation in line with economic ownership, one of the people said." https://www.cnbc.com/2018/04/27/t-mobile-sprint-merger-near-...
There is a decent picture about half way down in this article: https://www.digitaltrends.com/mobile/t-mobile-sprint-merger/
Softbank is selling at a loss here according to earlier reports that they paid $21.6B for a 72% share in Sprint https://newsroom.sprint.com/sprint-and-softbank-announce-com... and the merger values Sprint at $26.5B, of which 72% would be $19B.
It is a merger, but Softbank will get a smaller stake than DT. "The new company will be about two-thirds owned by T-Mobile shareholders and one-third Sprint, with board representation in line with economic ownership, one of the people said." https://www.cnbc.com/2018/04/27/t-mobile-sprint-merger-near-...
There is a decent picture about half way down in this article: https://www.digitaltrends.com/mobile/t-mobile-sprint-merger/
Softbank is selling at a loss here according to earlier reports that they paid $21.6B for a 72% share in Sprint https://newsroom.sprint.com/sprint-and-softbank-announce-com... and the merger values Sprint at $26.5B, of which 72% would be $19B.
The DOJ blocked the T-Mobile-ATT merger a few years back. That turned out to be really good for consumers as T-Mobile afterward introduced a lot of really nice initiatives.
The AT&T/T-Mobile merger is a bit of a weird case. The breakup fee was substantial at about $6B (half in cash, half in spectrum). Without that additional spectrum, T-Mobile would have had a hard time launching an LTE network. The combination of the breakup fee and the merger with MetroPCS left T-Mobile with a decent amount of new spectrum to deploy LTE on. Without the breakup fee, T-Mobile's future was a lot more dim. In some ways, I think regulators would have been more likely to approve it without the breakup fee.
The case was basically "T-Mobile doesn't have enough spectrum for LTE...you know, unless you deny this merger in which case we have to give them the spectrum they need."
It certainly turned out well for consumers, but part of the reason behind that is that T-Mobile was literally thrown new cards via the breakup fee. Their hand was really bad before that.
It certainly turned out well for consumers, but part of the reason behind that is that T-Mobile was literally thrown new cards via the breakup fee. Their hand was really bad before that.
They should have investigated the ATT->Cingular->ATT re-acquisition because the whole divestiture and reacquire scheme made no sense when cellular was clearly a growth industry a telecoms company would want in on. It had to be a scheme to hide something nasty on the books that conveniently disappeared in the shuffle.
It wasn't hiding something nasty.
First, AT&T didn't divest and re-acquire. The AT&T that you know today isn't the AT&T that sold off AT&T Wireless. For a little telecom history...
AT&T (the long-distance company) owned AT&T Wireless and other ventures like AT&T Broadband (which was sold to Comcast). AT&T Wireless eventually got bought by Cingular which was a joint-venture of SBC and Bell South (two local telcos). AT&T (the long-distance company) was bought by SBC in 2005 because, well, long-distance was dying. Given the AT&T brand, SBC re-branded itself as AT&T. In 2006, SBC bought Bell South giving them 100% ownership of Cingular which they decided to re-brand as AT&T.
So, it's really that AT&T Wireless was bought by Cingular (SBC/Bell South) and SBC ended up buying AT&T (the long distance company) and Bell South and re-branding the whole thing as AT&T. But it's really AT&T->Cingular (SBC/BellSouth)->Cingular (SBC) and then SBC re-branded everything to AT&T.
--
As another point, "cellular was clearly a growth industry a telecoms company would want in on" isn't necessarily true at the time. Cellular had very high costs compared to things like long-distance service. I mean, I remember when 10 cents per minute was a low rate for domestic long-distance. AT&T owned AT&T Wireless and spun it off in 2001 as a separate company. Even before Cingular bought them in 2004, AT&T had decided that wireless wasn't for them.
Was it short-sighted? Definitely. SBC bought AT&T (the long-distance company) for $16B while Cingular bought AT&T Wireless for $41B. AT&T made a lot of bad decisions during this era. They also wrote off home broadband. They spent $105B creating AT&T Broadband and then sold it to Comcast for $44.5B.
However, even with its broadband divestment, it's unclear whether AT&T Broadband was ever worth $105B. I mean, Comcast is a $189B company today and it looks like it was a $58B company before buying AT&T Broadband so over the course of 18 years, AT&T Broadband hasn't justified a $105B price tag. AT&T just way overpaid for being in an industry. At $105B, even if it grew to $189B, that would be 3% returns (and AT&T Broadband by itself isn't worth AT&T Broadband + Comcast + NBCUniversal + etc.). Point being, while broadband seemed like a growth industry that any telecom should want to be in, it was also an embarrassing money pit for AT&T. AT&T Broadband would never have justified the $105B they spent creating it.
Part of this is how the value of industries go. Sprint merged with Nextel in a deal valued at $72B. Today, Sprint is worth a third of that. So, even with hindsight, it's unclear that wireless is such a growth industry. AT&T (the SBC version) has done well out of it, but the industry is littered with poor-performing companies.
For example, take T-Mobile. It's been doing well recently, but it hasn't been a good investment for Deutsche Telekom. They bought VoiceStream for $35B and Powertel for $24B and SunCom Wireless Holdings for $2.4B bringing a total of $61.4B. Today, 18 years later, T-Mobile US is worth $63B, but Deutsche Telekom only owns 66% of it. So, Deutsche Telekom has lost a lot of money in the US wireless industry, even more so if you factor in opportunity cost over the past 18 years.
Likewise, AT&T Wireless was bought for $41B and was a substantially weaker company than Sprint is today. T-Mobile is buying Sprint for $26B. That's a Sprint with way more spectrum, way more customers, and way more cell sites than AT&T Wireless had. Sprint today is a more valuable company than AT&T Wireless was, but in hindsight we see that wireless companies weren't worth nearly as much as we thought they were.
In certain ways, the industry is crap. AT&T and Verizon basically showed that you could make money if you became giant. However, the industry also shows that if you're an also-ran, your future isn't bright. AT&T Wireless, as a competitor in a larger field, probably wasn't such a growth business that you'd want to be in. Purchasers of wireless companies have usually had to invest a lot in new spectrum and new networks and it really only made sense if you achieved a certain amount of scale - AT&T or Verizon-like scale.
The fact is that most wireless companies have done really badly. No investor today would go back and buy T-Mobile when it was launched in 2001. They spent over $60B on something that they were willing to sell to AT&T for $39B a decade later.
AT&T (the long distance company) sealed its fate by ignoring the future technologies (broadband and wireless) that would dominate our lives. However, it's unclear if they would have succeeded if they had held onto AT&T Wireless. Most wireless companies have declined in value over time and the two that haven't might have escaped that by creating a virtual duopoly. I know it's easy to look at the wireless industry and think, "everyone in America is paying them lots of money." However, most don't seem to hit the scale necessary to be good businesses and most have been bought for way more than they were worth.
It's easy to think of wireless as a growth industry that anyone would want to be in on. However, the history of the industry shows that most of the time it's been a losing proposition. Cingular definitely over-paid for AT&T Wireless. Sprint and Nextel definitely weren't worth the $36B a piece that they merged at. VoiceStream and Powertel definitely weren't worth the $35B and $24B that Deutsche Telekom paid for them. So, yea, AT&T (the long distance company) got rid of its Wireless business, but most wireless businesses were money pits that went down in value.
First, AT&T didn't divest and re-acquire. The AT&T that you know today isn't the AT&T that sold off AT&T Wireless. For a little telecom history...
AT&T (the long-distance company) owned AT&T Wireless and other ventures like AT&T Broadband (which was sold to Comcast). AT&T Wireless eventually got bought by Cingular which was a joint-venture of SBC and Bell South (two local telcos). AT&T (the long-distance company) was bought by SBC in 2005 because, well, long-distance was dying. Given the AT&T brand, SBC re-branded itself as AT&T. In 2006, SBC bought Bell South giving them 100% ownership of Cingular which they decided to re-brand as AT&T.
So, it's really that AT&T Wireless was bought by Cingular (SBC/Bell South) and SBC ended up buying AT&T (the long distance company) and Bell South and re-branding the whole thing as AT&T. But it's really AT&T->Cingular (SBC/BellSouth)->Cingular (SBC) and then SBC re-branded everything to AT&T.
--
As another point, "cellular was clearly a growth industry a telecoms company would want in on" isn't necessarily true at the time. Cellular had very high costs compared to things like long-distance service. I mean, I remember when 10 cents per minute was a low rate for domestic long-distance. AT&T owned AT&T Wireless and spun it off in 2001 as a separate company. Even before Cingular bought them in 2004, AT&T had decided that wireless wasn't for them.
Was it short-sighted? Definitely. SBC bought AT&T (the long-distance company) for $16B while Cingular bought AT&T Wireless for $41B. AT&T made a lot of bad decisions during this era. They also wrote off home broadband. They spent $105B creating AT&T Broadband and then sold it to Comcast for $44.5B.
However, even with its broadband divestment, it's unclear whether AT&T Broadband was ever worth $105B. I mean, Comcast is a $189B company today and it looks like it was a $58B company before buying AT&T Broadband so over the course of 18 years, AT&T Broadband hasn't justified a $105B price tag. AT&T just way overpaid for being in an industry. At $105B, even if it grew to $189B, that would be 3% returns (and AT&T Broadband by itself isn't worth AT&T Broadband + Comcast + NBCUniversal + etc.). Point being, while broadband seemed like a growth industry that any telecom should want to be in, it was also an embarrassing money pit for AT&T. AT&T Broadband would never have justified the $105B they spent creating it.
Part of this is how the value of industries go. Sprint merged with Nextel in a deal valued at $72B. Today, Sprint is worth a third of that. So, even with hindsight, it's unclear that wireless is such a growth industry. AT&T (the SBC version) has done well out of it, but the industry is littered with poor-performing companies.
For example, take T-Mobile. It's been doing well recently, but it hasn't been a good investment for Deutsche Telekom. They bought VoiceStream for $35B and Powertel for $24B and SunCom Wireless Holdings for $2.4B bringing a total of $61.4B. Today, 18 years later, T-Mobile US is worth $63B, but Deutsche Telekom only owns 66% of it. So, Deutsche Telekom has lost a lot of money in the US wireless industry, even more so if you factor in opportunity cost over the past 18 years.
Likewise, AT&T Wireless was bought for $41B and was a substantially weaker company than Sprint is today. T-Mobile is buying Sprint for $26B. That's a Sprint with way more spectrum, way more customers, and way more cell sites than AT&T Wireless had. Sprint today is a more valuable company than AT&T Wireless was, but in hindsight we see that wireless companies weren't worth nearly as much as we thought they were.
In certain ways, the industry is crap. AT&T and Verizon basically showed that you could make money if you became giant. However, the industry also shows that if you're an also-ran, your future isn't bright. AT&T Wireless, as a competitor in a larger field, probably wasn't such a growth business that you'd want to be in. Purchasers of wireless companies have usually had to invest a lot in new spectrum and new networks and it really only made sense if you achieved a certain amount of scale - AT&T or Verizon-like scale.
The fact is that most wireless companies have done really badly. No investor today would go back and buy T-Mobile when it was launched in 2001. They spent over $60B on something that they were willing to sell to AT&T for $39B a decade later.
AT&T (the long distance company) sealed its fate by ignoring the future technologies (broadband and wireless) that would dominate our lives. However, it's unclear if they would have succeeded if they had held onto AT&T Wireless. Most wireless companies have declined in value over time and the two that haven't might have escaped that by creating a virtual duopoly. I know it's easy to look at the wireless industry and think, "everyone in America is paying them lots of money." However, most don't seem to hit the scale necessary to be good businesses and most have been bought for way more than they were worth.
It's easy to think of wireless as a growth industry that anyone would want to be in on. However, the history of the industry shows that most of the time it's been a losing proposition. Cingular definitely over-paid for AT&T Wireless. Sprint and Nextel definitely weren't worth the $36B a piece that they merged at. VoiceStream and Powertel definitely weren't worth the $35B and $24B that Deutsche Telekom paid for them. So, yea, AT&T (the long distance company) got rid of its Wireless business, but most wireless businesses were money pits that went down in value.
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Yes but T-Mobile ATT is not the same as T-Mobile Sprint. letting number 3 and 4 merge is not the same as letting a top 2 eat a smaller competitor. Compared to, say, Disney-Fox this is not so dangerous for consumers most likely.
It's going to lead to higher prices just by virtue of the marketing being divided by three companies. Tmobile will need ROI and it'll get it via a noncompetitive telecom market
Right, and the best argument I've heard for letting T-Mobile and Sprint merge is that there's a real question of whether Sprint continues to exist absent a merger. Could be better to have 3 strong carriers competing than 2 strong ones, one weaker one, and one on the brink.
Granted, this is part of how TM/Sprint are trying to sell this to the DOJ, so worth taking it with a grain of salt.
Granted, this is part of how TM/Sprint are trying to sell this to the DOJ, so worth taking it with a grain of salt.
ATT had to pay $3b in cash to T-Mobile due to the failed merger as a penalty for it failing (part of the contract). That probably helped.
There’s no way for us to know if that was better for consumers than a merger.
Yeah, and I am tiger proof.
outside1234(1)
But the Disney and Fox merger got the green light? Seem like we are in a neverending era of mergers and consolidation. The big players get bigger and the number of competitors and options for customers decline.
I guess staying at the trump hotel didn't help them much.
I've stayed away from them after that and a terrible experience dealing with their customer support in regards to a warranty for a phone that stopped charging where they tried billing me for the phone and wouldn't return the old one.
On one hand, I wish we had more competition, but Sprint isn't viable long-term, and T-Mobile and Sprint combined still have fewer subscribers than both AT&T and Verizon, so in the interest of avoiding a duopoly, the merger is the best option.
I bet T-Mobile regrets having ever entered the US market. They tried to sell to at&t (denied), tried to sell to Softbank/Sprint, tried to merge with Sprint. I guess they might be doomed to be where they are forever.
At least the brand and network have gotten a lot better over the years.
Trying to acquire Sprint basically means they can't back out, because they'll never approve a merger when the industry will have two competitors
They astroturf on all the social media, I feel like that is unethical.
'better' for who?
'better' for who?
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