Leading Analysts Throw Cold Water on Notion of Likely Government Approval for Proposed T-Mobile and Sprint Merger

Washington, DC — While some observers have been speculating about rising odds that the government will approve the proposed T-Mobile and Sprint merger, several of the leading analysts in the telecom sector aren't buying the hype. After reviewing the range of filings and arguments to the FCC, Craig Moffett of MoffettNathanson and Blair Levin of New Street Research are more skeptical - each putting the odds at 50/50 or below. See relevant analyses below:

Craig Moffett of MoffettNathanson recently assessed, per Bloomberg:

"After all of our poking, prodding and analysis, we've yet to find an argument for or against that is significantly more persuasive than its counter," Craig Moffett, an analyst with MoffettNathanson, said in a note Wednesday. Moffett puts the odds of approval at 50-50."

Blair Levin of New Street Research stated:

"Recently, we have heard from both investors and press reports that the odds of approval of the T-Mobile/Sprint deal are rising. To a small degree, we agree. As noted last week, the rhetoric about 5G from FCC and Administration officials mirrors the framework that advocates for the deal have urged them to adopt; that 5G leadership is a critical priority for job creation and economic leadership.

We don't believe, however, that those comments move the needle much. After all, those statements by government officials don't go to the primary antitrust issue: is the merger likely to cause substantial harm to competition in a relevant product and geographic market? As to that issue, as we were reminded this week in a series of filings by opponents, there are a number of arguments, particularly as to current markets, that suggest the answer may be yes … The three most significant filings in opposition, in our view, came from DISH, the Communications Workers Union (CWA), and a Coalition of Public Interest Groups.

DISH … Among the arguments that DISH makes, backed up by their expert economists, is that the deal will likely increase prices, that the prepaid and post-paid markets are separate markets and the deal will likely rise prices in both, that the history of 4-to-3 deals shows that such deals result in price increases and other harms to competition including increased coordination, and that facilities based market entry by others is unlikely.

Communications Workers of America's filing repeated a number of the DISH arguments but also focused on the job impact, claiming that the merger would result in a loss of 30,000 jobs.

… The Public Interest Coalition, a coalition of public interest organizations also filed in opposition. A number of the arguments are similar to the arguments noted above but there is also a particular emphasis on the spectrum concentration issues and the impact on rural communities.

In the same way that the DISH filing will be particularly helpful to states seeking to litigate, we think the CWA and Public Interest filings provide fodder for political figures who wish to voice opposition to the deal.

None of the arguments from the opponents came as a surprise to us, as they are consistent with traditional antitrust analysis in terms of market definitions, impact on prices, and the prospects for coordination … What is a bit surprising, in our view, is that a number of public commentators on the deal have largely ignored these arguments and suggested that the invocation of 5G is sufficient to justify the deal.

So the odds, in our view, remain where they started. If the deal were simply up to DOJ Antitrust Chief Delrahim and the FCC, the odds would be slightly better than even that the deal would be approved. But given the potential actions from states or the White House, we continue to believe that the odds are slightly worse than even. We simply have not seen data—as opposed to atmospherics—coming from the governments or the parties that suggest the risks to the deal have diminished."