Reports circulated out of Japan and Germany late last week indicating Deutsche Telekom AG, owner of T-Mobile US Inc., reached a tentative agreement to sell T-Mobile to Softbank, owner of Sprint Corp. The potential merger of the third and fourth largest wireless carriers has sent rumors of regulatory challenges flying. Other news agencies, like Reuters, have said that crucial details including “price and financing remain to be worked out.” None of the companies, however, have commented on the possible buyout.
Both Deutsche Telekom and Softbank have been frank about their desire to ink a deal. Likewise, leading regulators at the Department of Justice (DOJ) have raised public concerns about the anticompetitive effects of the potential deal. Earlier this year, William Baer, the assistant attorney general for the antitrust division at the DOJ, voiced his opinion that “consumers have benefitted from much more favorable competitive conditions” by having four major players in the wireless carrier industry. As a result, he has expressed hesitation about the DOJ antitrust division’s ability to clear the long-rumored deal, which would create a narrower sector.
Sprint’s chairman, Masayoshi Son, has countered with a public campaign touting the benefits of the tie-up, including creating a more equal competitor to level the playing field with rival behemoths Verizon and AT&T. Son has also encouraged regulators to more broadly consider access to internet, rather than the wireless industry alone. Along those lines, he has made several proposals regarding mobile broadband and promised that with “a three heavy-weight fight” he would engage in “a more massive price war, a technology war.”
Still, industry commentators doubt the ability of the deal to clear regulatory hurdles. Some have pointed to a lack of evidence from Son and Softbank showing that more effective price competition could flourish in a competitive environment with only three major players. Such data is likely crucial to the fate of the tie-up, as a lack of similar data helped bring down AT&T’s prior proposed deal to purchase T-Mobile. Additionally, the deal would require the Federal Communications Commission’s (FCC’s) approval alongside that of the DOJ. Many cite FCC Chairman Tom Wheeler’s cable and wireless industry experience as indicating opposition to the deal.
Reports stated that Deutsche Telekom, which owns a 67 percent stake in T-Mobile, may be interested in keeping a small portion of its ownership interest—perhaps as much as 15 percent—in T-Mobile. If Softbank moves forward, it may face challenges in a bid for T-Mobile, including cable giant Comcast.