Sprint executives are reconsidering their bid for T-Mobile following regulatory pressure, according to a report by the Wall Street Journal. While Sprint always knew getting a merger approved would be an uphill battle, unnamed sources familiar with the matter told the WSJ that the company wasn’t expecting a strong, swift and very public opposition from regulators.
William J. Baer, an Assistant Attorney General for the Justice Department’s Antitrust Division, said in an interview with the New York Times two weeks ago that it would be “hard for someone to make a persuasive case that reducing four firms to three is actually going to improve competition for the benefit of American consumers.” FCC Chair Tom Wheeler is also incredibly skeptical of a merger, according to a report from Reuters.
All of the arguments seem fairly similar to what happened when AT&T tried to buy T-Mobile in 2011: Regulators are concerned that turning the U.S. into a market with three major wireless carriers could have a negative impact on competition in the wireless space. While Sprint Chairman Masayoshi Son is interested in combining the two companies, the WSJ reported that he doesn’t want to try if it’s not possible to get a deal past regulators.
Trying to get a merger approved has been made significantly more difficult by T-Mobile’s competitive resurgence thanks to the company’s “Uncarrier” moves, which have pushed competitors to offer similar programs and brought customers to T-Mobile.
While Sprint is reportedly close to acquiring financing for a deal between the two companies, the regulatory opposition means that the companies need to line up bulletproof arguments about why a merger wouldn’t hurt competition in the wireless space. One of the top arguments for a merger is that combining T-Mobile and Sprint would create a third wireless carrier with enough subscribers and spectrum to put up a competent fight against AT&T and Verizon.
In the meantime, the two companies are working on their own plans. T-Mobile, which recently announced that it will cover the early termination fees of customers switching from other carriers, has gone on a major advertising push, including a trio of ads that show NFL players switching away from Sprint. Sprint, for its part, recently announced that it’s bringing Direct Connect push-to-talk voice messaging to more smartphones running on its network.