Package deal in exchange for T-Mobile merger approval

14th May 2018
Source: GlobalData
Posted By : Lanna Cooper
Package deal in exchange for T-Mobile merger approval


The recently announced merger between US mobile operator rivals T-Mobile and Sprint in an all-stock transaction valued at $26.5bn will be no slam dunk according to GlobalData. Getting regulatory approval will be the hardest part of this proposed transaction.

Emma Mohr-McClune, Service Director: Global Telecom Consumer Services, Platforms and Devices at GlobalData, commented: ‘‘Most discussion we’ve seen in the market to date has come down in one of two directions on the regulatory approval question. But it’s possible the Federal Communications Commission (FCC) and the Department of Justice (DOJ) will attempt to impose a package of conditions on the proposed merged entity, to guarantee competition in the market, in exchange for their agreement.

''For example, the regulatory parties could force the proposed merger parties to agree to a set conditions, from selling one or even some of their mobile secondary brands, to divesting spectrum and associated rights, agreeing to wholesale market expansion obligations, or even to accepting a new US MNO market entrant as a result - or even a sub-set of these conditions.

“Both T-Mobile and Sprint are excellent lobbyists, and will be ready to cut a deal - but not necessarily any deal. We anticipate a period of intense negotiations in the weeks and months to come, with an uncertain outcome.’’

T-Mobile and Sprint have been engaged in on-and-off again merger discussions since 2014 but were never able to agree on terms. T-Mobile reportedly had always insisted on controlling the new company and has gotten its way in this proposed merger. T-Mobile’s parent company Deutsche Telekom is poised to own 42% of the proposed merged entity, while Sprint’s parent Softbank would own 27%.

Mohr-McClune added: ‘‘In the initial statements, the CEOs of Sprint and T-Mobile have argued that the proposed merged entity will help the US in the global 5G race, create jobs and better, more competitive services for US consumers and businesses alike. These are arguments squarely targeted at gaining the necessary regulatory approval required for this deal. With good reason; that approval is anything but certain, and could end up costing the proposed merged entity dear, or even, more than they’re willing to accept.’’

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