Arguments for and against the proposed T-Mobile/Sprint merger were filed at the California Public Utilities Commission on Friday (links are below), which was also the last day of testimony in the federal anti-trust trial launched by California’s attorney general and others opposed to the deal. Closing court arguments are scheduled for 15 January 2020. The CPUC’s review will run at least into February, and possibly longer.
T-Mobile and Sprint (but it’s T-Mobile running the show) said, as they have all along, that the deal will produce nothing but wonderfulness for California, and adding DISH to the mix just makes it super awesome. They also reiterated their position that the CPUC has no authority to approve or block the merger of two mobile carriers, or to impose conditions on it.
These latest briefs, like the hearings a couple of weeks ago, focus on a narrow set of questions relating to the proposed spin off of people, stores, cell sites and spectrum to DISH. One question is whether losing those assets will degrade T-Mobile’s service or hamper its plans in California. T-Mobile says no…
The DISH Divestiture, and the services to be provided to DISH, will have no adverse impact on New T-Mobile’s network plan…the capacity of the New T-Mobile network for the combined companies will be far greater than what is currently available or what is projected to be available from the merging companies on a standalone basis.
Another key question is whether DISH can and will be a competitive counterweight to AT&T, Verizon and the new, bulked up T-Mobile. DISH didn’t address that question in its own brief, choosing instead to respond narrowly to criticism of its ability to protect consumer privacy. So T-Mobile did the heavy rhetorical lifting. Most of its arguments were aimed at the can half of that question. DISH owns a considerable amount of spectrum and if – if – it raises the $10 billion (it thinks) or more (some analysts think) it’ll cost to build and staff a new, nationwide mobile network, then it probably can.
It’s the will that’s unknown. Only DISH can answer that. T-Mobile’s brief focused on the possible penalties DISH would suffer if it doesn’t hit particular targets. But there’s a gap between those targets and the infrastructure and retail presence needed to compete on an even footing with three big, mature companies with a national footprint and huge customer base. And many of the penalties that T-Mobile points to are empty threats such as losing spectrum rights in counties it chooses not to serve, or consequences DISH faces anyway, like forfeiting spectrum licenses it already owns but hasn’t done anything with yet.
As the Communications Workers of America – the major telecoms union in California – points out in the brief it filed…
While DISH may face financial penalties if it does not honor its commitments, the financial incentives to walk away from its commitments for the right price heavily outweigh any penalties. One analyst wrote, “[w]e also cannot discount that Dish pulls out at the last moment and sells its spectrum. Its spectrum is worth much more—with some estimates around $30 billion—than the $3.6 billion that it paid for the Sprint prepaid business and the fine to the government.”
DISH will do what it’s always done and what any successful company does: maximise shareholder value. Restrictions on DISH selling out to AT&T or Verizon, or selling back to T-Mobile expire in seven years, which is an eye blink compared to the lifespans of telecoms monopolies, which, on the available evidence, are measured in centuries.
Possible penalties might or might not be less than the cost of pushing ahead. Building a physical network could turn out to be a losing proposition for DISH.
Charlie Ergen, its CEO, won’t hesitate to fold a losing hand. There is no guarantee DISH will do much of anything. Or that the U.S. mobile telecoms market won’t contract from four to three players.
Briefs regarding the T-Mobile/Sprint merger, filed at the CPUC on 20 December 2019
My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary. Take it for what it’s worth.