Tag Archives: sprint

Partisan shift in Congress could influence anti-trust reviews of T-Mobile’s takeover of Sprint

by Steve Blum • , , , ,

The flip from a republican majority to a democratic one in the federal house of representatives has opened a window of opportunity for, among others, those opposed to T-Mobile’s planned takeover of Sprint. A coalition of fourteen labor organisations and a wide range of advocacy are urging the presumed incoming chairmen of the house judiciary, and energy and commerce committees to investigate the “likely effects” of the deal.

In a letter sent yesterday (h/t to a story by Harper Neidig in the Hill for the pointer), the groups reminded representatives Jerry Nadler (D – New York) and Frank Pallone (D – New Jersey) that they spoke out against the merger when democrats were the minority party, that they should follow through now that they’re in the majority…

Representative Pallone, on April 30th you and Representative Doyle wrote to Chairman Walden and Chairman Blackburn requesting a hearing on the proposed Sprint/T-Mobile merger. You correctly pointed out that due to its “primary jurisdiction over the wireless industry, [the Energy and Commerce Committee has] a responsibility to understand the potential effect of this merger on consumers, workers, and the communications market.” You added that “the merger would create a new wireless behemoth by shrinking the number of nationwide wireless providers from four to three.” You went on to say that the Committee should explore the merged entity’s foreign ownership; whether 5G deployment is helped by the proposed merger, despite the fact that both T-Mobile and Sprint have invested in 5G already; and the state of wireless competition.

We agree. We hope you will now announce your intent to schedule exactly this kind of hearing.

The groups include the Greenlining Institute and the Communications Workers of America, which are also opposing the merger at the California Public Utilities Commission.

Congress has no direct role when it comes to reviewing mergers. At the federal level, that job falls to the justice department and the Federal Communications Commission. But they do have to answer to congress, at one level or another.

T-Mobile not worried about speed or result of CPUC review of Sprint deal

by Steve Blum • , , , ,

T-Mobile doesn’t seem to be too worried about getting approval from the California Public Utilities Commission for its proposed takeover of Sprint. The company’s chief financial officer, Braxton Carter, spoke at an investment conference in Barcelona last week, and offered an optimistic timeline to complete the transaction…

The goal, we believe, is still to close this transaction…in the first half, probably in the second quarter of ’19. You look at the shot clock with the FCC, it’s really implying a very early April end of that shot clock at this point, and that’s why I’m more pointing to the second quarter is more probable. It can still be first quarter, but it’s going, we think, exceedingly well. But I think by the end of the year, we’ll be in a much better position.

Braxton’s focus is on regulatory approval from the federal justice department and the Federal Communications Commission – he didn’t mention state-level reviews at all – so he might or might not be factoring the CPUC’s process into his estimate. The timeline for the CPUC’s review calls for a decision to be reached in the second quarter of next year, too, but earlier indications were that means sometime in the summer of 2019, perhaps June.

The CPUC’s review potentially includes a wide range of issue – no particular limits were set on the extent of the inquiry – but big question is the impact the merger will have on competition in California’s mobile marketplace. Overall, U.S. consumers already pay the highest prices for mobile bandwidth in the developed world. Going from four national competitors down to three would mean a significantly less competitive environment for mobile customers. T-Mobile’s counter argument, according to Braxton, is that it’s really about “two going to three, the creation of a third, more-scaled national player to compete against a predatory duopoly that controls 85% of the cash flows in the marketplace”.

U.S. mobile bandwidth is rich world’s most expensive, and it could get worse

by Steve Blum • , , , ,

Mobile broadband prices in the U.S. are the highest in the developed world, according to a report just published by a Finnish research company. A study by Rewheel concluded that even though there are four seemingly competitive mobile operators in the U.S., “gigabyte prices are not competitive”, and “the US has the 5th highest gigabyte prices in smartphone plans and is the most expensive market in mobile broadband among the 41” European Union and other developed countries (i.e. those that belong to the Organisation for Economic Cooperation and Development).

One gigabyte of mobile data in the U.S. costs $6.77 on average. That’s higher than any other country, although perhaps there’s some comfort in knowing that Canada is second highest, at $6.18 per gigabyte. The European Union average is $2.33 per gigabyte, and the overall OECD average is $3.03 per gigabyte. (I’ve converted Rewheel’s cost figures from euros to dollars, using its benchmark rate of €30 equals approximately $35).

The story gets even bleaker when competition is factored in. Like many developed countries, the U.S. has four competing mobile operators, but that doesn’t translate into competitive prices. The average mobile broadband price in countries with four carriers is $2.97 per gigabyte, less than half the cost in the U.S. Countries with only three mobile operators have an average per gigabyte price of $3.73, which is still three bucks cheaper than in the U.S. market, which is theoretically more competitive.

Theoretically. And maybe not for long.

T-Mobile is trying to get permission from federal authorities and the California Public Utilities Commission to buy Sprint. Rewheel concludes that “the 4 to 3 US merger, if approved without the upfront entry of a new 4th [mobile network operator] will lessen the already weak competition”.

Despite the Alice in Wonderland claims made by the two companies, competition will not intensify if there are fewer mobile carriers in the U.S. market. Fewer competitors equals less competition. If that wasn’t obvious to the Federal Communications Commission, the federal justice department and the CPUC before Rewheel’s report came out, it should be now.

T-Mobile Sprint merger will eliminate thousands of California jobs, union says

by Steve Blum • , , , ,

The Communications Workers of America (CWA), which is the largest telecoms union in California, asked to join the California Public Utilities Commission’s inquiry into T-Mobile’s proposed takeover of Sprint yesterday. In its “motion for party status”, CWA said it represents wireless industry workers at AT&T and “as members of T-Mobile Workers United, an organisation of T-Mobile and MetroPCS employees”.

Many could lose their jobs, according to the union’s motion…

The T-Mobile/Sprint merger will have a significant impact on CWA members, both as workers in the industry and as consumers of wireless services. CWA’s research shows that the merger will result in the loss of 3,185 retail jobs in California due to store closures and consolidation. In addition, the proposed transaction could increase concentration in the wireless industry labor market with negative impact on industry-wide wages…

CWA District 9 intends to actively participate in this proceeding.

It’ll be up to the CPUC administrative law judge handling the case to decide whether CWA can jump into the proceeding at this point, but such requests are typically granted. The commissioner in charge, Clifford Rechtschaffen, didn’t call out employment issues as a particular focus of the inquiry in the “scoping memo” he issued a couple of weeks ago, but he also stated that the list was “non-exhaustive”.

Reviewing labor implications would be completely consistent with past practice and California’s public utility law, which directs that utility mergers must “be fair and reasonable to affected public utility employees, including both union and nonunion employees”. It’s not 100% clear whether the T-Mobile Sprint transaction is big enough to require that kind of review, but there’s little doubt the CPUC can choose to do so.

Two other groups that are protesting the merger – TURN and the Greenlining Institute – also filed paperwork, saying they expect to ask to be compensated by the companies for their efforts, as California law also allows. They estimate that they’ll run up a combined bill of $152,000.

T-Mobile, Sprint merger review widens in California

by Steve Blum • , , , ,

It seems someone jumped the gun at the California Public Utilities Commission, and prematurely sent out a ruling defining the scope of California’s regulatory review of T-Mobile’s proposed purchase of Sprint. On Thursday, the commissioner in charge of the inquiry, Clifford Rechtschaffen, issued an amended version of the “scoping memo” he released the week before, saying the first one “was mailed in error”.

There are several wordsmithing changes in the updated version, and a few that are more substantive. One big change is a broad, up front statement making it clear that there are no particular limits to what the review will cover…

The scope of this proceeding includes all issues that are relevant to evaluating the proposed merger’s impacts on California consumers and determining whether any conditions should be placed upon the merged entity.

Additions to the specific, but “non-exhaustive” list of items that will be covered include consideration of potential new services the combined company might offer and – for both new and existing services – the impact on communities and regions, as well as California a whole.

The net result is that the focus (if you want to call it that) of Rechtschaffen’s investigation is even wider than before. It won’t be limited to a few specific and largely technical issues, as T-Mobile and Sprint had hoped.

The original schedule called for a final decision by next June. The core of the new schedule tracks with the original one, but the beginning of public hearings over the next two or three months, and the final wrap up next spring (or maybe summer?) are more indeterminate. Instead of the CPUC voting on a final decision in “June 2019”, the schedule calls for that to happen in “2nd Quarter 2019”. Given the way decisions are drafted, reviewed and then put on the commission’s agenda, June is still a reasonable bet. But it might happen sooner. Or later – CPUC timelines have been known to slip.

California’s regulatory review of T-Mobile-Sprint deal has light years left to run

by Steve Blum • , , , ,

The proposed purchase of Sprint by T-Mobile will get a thorough workover by the California Public Utilities Commission, and a final decision on whether or not to allow it won’t come until next summer. The commissioner running the review, Clifford Rechtschaffen, laid out the issues that he’ll investigate in a ruling on Friday.

Rechtschaffen had to decide how wide ranging his inquiry will be. Sprint and T-Mobile wanted it to be very narrow, and focus on two particular issues: could a relatively small Sprint subsidiary that does some wireline business in California be sold to T-Mobile, and could T-Mobile take over Sprint’s California mobile carrier registration. Technically, that’s just a simple notice that it has a federal license, but transferring it requires CPUC sign-off. As they tried to argue, both were matters of minor paperwork. These aren’t the droids you’re looking for, move along, move along.

Protests came from the usual suspects. TURN (aka The Utility Reform Network), the Greenlining Institute and Media Alliance – non-profit advocacy groups that rely heavily on “intervenor compensation” handed out by the CPUC – objected. So did the CPUC’s internal advocacy unit, the office of ratepayer advocates. They wanted the commission to review the whole merger, and all its potential impacts on Californians.

Rechtschaffen resisted the Jedi mind trick and sided with the protestors. He listed fourteen questions that have to be answered before the CPUC makes a final decision. The timeline he laid out says that will happen in June 2019.

The topics of those questions range from the merger’s competitive impact on mobile service and the fiber backhaul markets in California, whether or not innovation will be helped or harmed, and what, exactly, are the wonderful “efficiencies” that Sprint and T-Mobile promise will come our way if they’re allowed to combine. He’ll also consider the need for and the nature of “conditions or mitigation measures to prevent significant adverse consequences” that the CPUC might impose.

The public will be involved. Rechtschaffen plans to hold a series of public hearings in November and December, which will presumably be held in several locations around California. After that, both sides will file position papers, present evidence at a formal hearing, and submit their arguments and counter-arguments. Once that’s done – by mid-March – it’ll take about three months to produce, review and vote on a final decision. That’s the planned schedule, anyway. Much can happen that might speed up or, particularly, slow down the proceeding.

T-Mobile’s takeover of Sprint challenged in California

by Steve Blum • , , , ,

T-Mobile’s plan to buy its smaller competitor, Sprint, faces formal opposition in California. The California Public Utilities Commission’s office of ratepayer advocates and a pair of consumer advocacy groups filed formal protests to the merger, claiming, among other things, that it runs afoul of anti-trust principles and would result in a significantly less competitive mobile telecoms market.

The deal has to be approved by the CPUC, but the scope of that review is limited. So far. T-Mobile needs the CPUC’s okay to take over Sprint’s relatively small wireline business, and to put its name on Sprint’s California wireless registration. The former poses broad questions for a tiny aspect of the merger; the latter involves a narrow look at the larger business.

The protestors want the CPUC to combine it all into a single case and make it a comprehensive enquiry that considers the total impact of reducing the number of mobile broadband companies in California from four to three.

As the joint filing by the Utility Reform Netowrk and the Greenlining Institute put it…

The Wireless Application makes the rather bold claim that the elimination of Sprint as a competitor will nevertheless promote competition. However, when discussing the combined company’s position as a competitor, Applicants focus on the combined company’s ability to compete with “premium” brands like Verizon and AT&T, as well as cable companies’ voice and data plans. The Wireless Application is silent as to the combined company’s plans to target more value conscious customers. Joint Consumers are concerned that the proposed transaction would eliminate Sprint and T-Mobile as companies with affordable service offerings and reasonably priced equipment, and, instead, create a “third AT&T/Verizon” that lacks the incentive to serve lower-income or low-margin customers. In fact, the Federal Trade Commission and Department of Justices’ Horizontal Merger Guidelines expressly acknowledge that a combined company may have the incentive to eliminate lower cost offerings in order to drive customers to more expensive (and more profitable) offerings.

It is bold indeed to say that reducing the number of competitors makes a market more competitive. Maybe it’s possible to prove that it’s true. I doubt it, but the CPUC should give T-Mobile and Sprint a fair shot at making that case. If they can’t do it with hard evidence – as opposed to the rhetoric they’ve relied on so far – then the CPUC should block the merger.

T-Mobile’s purchase of Sprint has to clear a Californian hurdle

by Steve Blum • , , , ,

T-Mobile, the third largest U.S. mobile carrier, needs the California Public Utilities Commission’s blessing to buy Sprint, the fourth largest. Sorta.

The Federal Communications Commission has jurisdiction over mobile carriers and is doing the heavy lifting in the regulatory review of the transaction. But Sprint has a subsidiary – Sprint Communications Company, or “Sprint Wireline” as it’s referred to – that sells services to business customers in California. As a result, the company has a certificate of public convenience and necessity (CPCN) granted by the CPUC, and needs its approval to transfer ownership to T-Mobile.

In the joint application submitted by the two companies, Sprint Wireline’s business is described as limited “exclusively to enterprise and carrier customers”. It’s no big deal, they claim…

This transfer will not have any impact on the provision of [competitive telecoms] service or competition in that market. T-Mobile does not currently provide such services and neither it, nor any of its California operating subsidiaries, are certificated [competitive telecoms service] providers. Moreover, because this is a parent-level only transaction, with no change in day-to-day operations of Sprint Wireline, the Commission will retain exactly the same regulatory authority over Sprint Wireline that the Commission possessed immediately prior to the Transaction. In addition, the Transaction is transparent to Sprint Wireline’s customers as Sprint Wireline will continue to honor its existing contractual obligations.

The key question is whether the CPUC looks at all the business that Sprint does in California – including mobile – or focuses on the much smaller wireline portion. Going large means closer scrutiny and, perhaps, conditions attached to the sale. A narrow focus on just the wireline business would likely be much less fraught.

In the past, the CPUC has either sidestepped the question, as it did with CenturyLink’s purchase of Level 3 Communications, or based its review on the big picture, and the tougher standards that entails, as it did with Charter Communications’ acquisition of Time Warner Cable’s Californian systems.

The T-Mobile/Sprint deal is different, because there’s a clearer regulatory distinction between wireline and mobile companies, and the certifications and licenses they’re required to have. The CPUC has to decide whether it’s a big enough difference to justify waving the deal through.

T-Mobile, Sprint combo is anti-competitive, but that’s the feds’ call

by Steve Blum • , , ,

The $26.5 billion dollar proposed purchase of Sprint by T-Mobile can’t go forward unless it’s given a pass by anti-trust watchdogs. As a practical matter, that means the federal justice department’s anti-trust unit sits on its hands and doesn’t challenge it in court, and the Federal Communications Commission signs off on the license transfers involved.

In theory, the California attorney general could jump in. In practice, that’s unlikely. So let’s set it aside for now. Unless there’s some obscure wireline telephone asset involved – anything is possible, but I don’t think so – the California Public Utilities Commission isn’t in the game either.

It’s down to the feds. And the likeliest source of opposition is the justice department’s anti-trust unit. It took on AT&T’s acquisition of Time Warner, although its lawsuit appears to be on the ropes.

The question is whether combining T-Mobile and Sprint into one company makes the U.S. mobile telecoms market significantly less competitive. Right now, they are two of the four mobile carriers that are worth worrying about (the other two are AT&T and Verizon, but you knew that).

T-Mobile has 17% of the U.S. mobile broadband market; Sprint has 13%. Both are in the habit of making significant market gambles – unlimited data plans, for example – that the big boys, with roughly a third of the U.S. market each, are forced to match. That’s a significant benefit to consumers, even if it doesn’t warm shareholders’ hearts.

When you’re in imminent danger of falling off a market share cliff at any moment, you assess risk differently than someone with a comfortable third of the pie. Which is what the new T-Mobile would have. Allowing it that level of comfort would decrease the competitive pain of its new peers, as well as consumer’s competitive market pleasure. We’ll see if the federal justice department arrives at the same answer.

T-Mobile, Sprint about to turn U.S. mobile market into a threesome

by Steve Blum • , , ,

Update: the deal is done.

The competitive mobile broadband market might not be as red in tooth and claw in the near future. According to several media outlets, T-Mobile and Sprint, the number three and four mobile carriers in the U.S., are on the verge of announcing a merger. It’s the second time they’ve gone down this path. According to CNBC, this time it’s because the competition is too much for the smaller Sprint…

Talks most recently broke off late last year after SoftBank CEO Masayoshi Son decided he didn’t want to lose control of a combined company. Deutsche Telekom will own more than 40 percent of the new company, with SoftBank’s ownership just below 30 percent.

Several things changed over the last few months that led Son to change his mind, including greater synergies from lower corporate taxes, an increased understanding of how much 5G deployment will cost Sprint, and a rapidly changing competitive wireless landscape that now includes cable providers.

The big question – besides will they do it – is whether the federal government’s antitrust watchdogs will allow it. They scuppered AT&T’s 2011 attempt to buy T-Mobile because they deemed it anticompetitive. Duh.

This deal is more complicated. Arguably, a combined T-Mobile and Sprint would be a more formidable opponent for Verizon and AT&T, number one and two in market share with 35% and 33% respectively. Combined, T-Mobile and Sprint would have 30%, and be worth $26 billion.

On the other hand, it was the unlimited rate plans offered by the two smaller companies that forced the big boys to follow suit last year. Whether the merged company, with a market nearly even with the leader, would share have the same manic drive to catch up or would simply relax into a comfortable oligopoly is the key antitrust issue.

The marriage announcement, if it comes, is expected later today.