T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S) have been hard at work trying to get their $26 billion megamerger approved by regulators. After getting the blessing of the Federal Communications Commission, the companies have been negotiating with the Department of Justice’s antitrust division, offering various types of concessions that could include divesting spectrum and the Boost Mobile subsidiary in order to allow a new fourth carrier to be created. Negotiations have been ongoing for weeks and may be stalling.
If no agreement is made soon, the DOJ might sue to block the deal.
Deutsche Telekom’s hang-up
CNBC is reporting this morning that T-Mobile, Sprint, and their respective majority owners will need to reach a deal by next week, otherwise antitrust regulators will step in to try to stop the merger.
The main hang-up appears to be T-Mobile parent company Deutsche Telekom(NASDAQOTH:DTEGY), which wants to attach strings to any divestiture deal. DISH Network (NASDAQ:DISH) is reportedly the top bidder and has offered an estimated $6 billion for the package. Boost Mobile is a mobile virtual network operator (MVNO) that Sprint owns and that uses Sprint’s network.
Deutsche Telekom is concerned that if it agrees to the divestiture deal as it is currently structured, another larger company could subsequently swoop in to acquire DISH and all those assets, effectively using New T-Mobile’s (what the new combined company would be called) network to compete against it. The German telecommunications giant wants to preclude that possibility, but regulators aren’t keen on that condition.
The deal that is reportedly on the table right now would allow DISH unrestricted access to wholesale capacity for three years, according to CNBC. Deutsche Telekom wants to be able to terminate any wholesale agreement in the event of a subsequent acquisition. The fear — which is completely justified — is that a giant cable company like CNBC parent Comcast or Charter Communications will step in. It’s worth noting that Charter was reportedly in the running to acquire the assets, and both cable giants have been expanding their respective MVNO businesses.
By itself, DISH isn’t much of a competitive threat. While the satellite TV company has been amassing spectrum for years, it has been slow to actually utilize the spectrum and is at risk of having its spectrum licenses revoked for precisely that reason. A larger cable company with deeper pockets and complementary telecommunications businesses would represent a much greater threat, particularly if armed with spectrum and wholesale capacity to use in the interim while it built up its own 5G network.
This article originally appeared in the Motley Fool.
Smartphones with the Sprint logo are seen in front of a screen projection of the T-mobile logo, in this picture illustration taken April 30, 2018. Photo: REUTERS/Dado Ruvic/Illustration/File Photo GLOBAL BUSINESS WEEK AHEAD
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