DOJ Signals Problems with Possible Sprint, T-Mobile deal

According to The Wall Street Journal’s MarketWatch, Sprint board members Masayoshi Son and Dan Hesse met with U.S. Justice Department officials in January,  and the results were none too encouraging for Sprint’s rumored acquisition of rival T-Mobile. According to the WSJ, DOJ officials told the Sprint executives "they would view an acquisition of rival T-Mobile US with skepticism.”

It seems Son and Hesse are serious about pursuing T-Mobile. “Sprint got assurances from banks earlier this month,” the story said, “that a deal to buy T-Mobile for around $31 billion could win financing, people familiar with the matter said.”

Although some sources differed on the Justice Department’s level of distress over the possible deal, “U.S. antitrust authorities regard the current lineup of four national mobile-phone carriers as important to maintaining a competitive market.”

Moreover, on January 24, Speed Matters reported that Renata Hesse, deputy  assistant attorney general for criminal and  civil operations at DOJ’s Antitrust Division, hinted strongly at a tech conference that some in the department have grave doubts about the proposed Softbank/Sprint takeover of T-Mobile.

But it’s not just regulators who are viewing the merger with suspicion. An analysis on the subject from Bank of America/Merrill Lynch was entitled What is the rush? Why, asked the B of A report, would Masayoshi Son not want to wait and see if T-Mobile’s turnaround would succeed? The report also noted the substantial network integration problems -- Sprint's CDMA, WiMax, and TD-LTE networks are not compatible with T-Mobile's GSM, HSPA+, and FD-LTE networks.

B of A, though, is most concerned about the value of such a merger to investors. “Recent press speculation that Softbank may be pursuing T-Mobile has clearly benefitted Sprint’s stock,” said the analysis. But, “Presumably, if this speculation ends, the stock will fall and the focus will return to fundamental results which we believe, excluding accounting benefits, will fall below Street consensus expectations for 2014.”

Speed Matters believes that a Sprint takeover of T-Mobile would be bad for subscribers, bad for workers and bad for telecommunications competition in general.

U.S. skeptical on Sprint's possible T-Mobile deal (Marketwatch, Jan. 28, 2014)

Sprint takeover of T-Mobile may hit regulatory wall (Speed Matters, Jan. 24, 2014)

What is the rush? (B of A/ Merrill Lynch report, Jan. 29, 2014)