Commentary

Proposed T-Mobile, Sprint Merger Passes Two Key Security Reviews

The Committee on Foreign Investment in the United States (CFIUS) yesterday gave a green light to the plans of T-Mobile to acquire Sprint for $26.5 billion and to merge their operations starting early next year. In addition, “Team Telecom” -- a collection of representatives from the Department of Homeland Security, the Department of Justice, the FBI, the Department of Defense, the Department of Commerce and the Office of the U.S. Trade Representative -- told the companies that it has no objections to the pairing of the No. 3 and No. 4 wireless carriers in the U.S.

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“That means the government apparently does not have a national security issue with the fact that U.K.-based SoftBank Capital will have 27% of the combined company and Saudi Arabia has invested billions in SoftBank's tech-focused Vision Fund, or the fact that Netherlands-based T-Mobile parent Deutsche Telecom could have up to 100% of indirect ownership in a merged T-Mobile-Sprint combo, or concerns about Chinese telecom tech in the merged network,” John Eggerton writes for Multichannel News.

On the contrary, “we are a step closer to offering customers a supercharged disruptor that will create jobs from day one and deliver a real alternative to fixed broadband while delivering the first broad and deep nationwide 5G network for the United States,” T-Mobile CEO John Legere says in a statement confirming the news broken earlier in the day by the Wall Street Journal.

“The CFIUS review took place while a host of other U.S. officials waged a separate campaign to persuade allies to cut ties with China’s Huawei Technologies Co., which works with Deutsche Telekom and Softbank abroad. These U.S. officials have cited concerns that the Chinese telecommunications giant would use its hardware to spy on foreign networks, which Huawei has denied,” the WSJ’s Drew FitzGerald and Kate O’Keeffe report.

“CFIUS previously required Sprint to remove Huawei equipment from its U.S. network as part of a 2013 review triggered by SoftBank’s purchase of a controlling stake in Sprint. Deutsche Telekom went through a similar process when it entered the U.S. market. But anything that relates to networks overseas is outside the scope of the committee’s authority,” they add.

“Proponents of the deal said it would make the combined company, with about 100 million customers, a competitor that would be able to go toe-to-toe with AT&T and Verizon in the battle to dominate the next frontiers of wireless technology in the United States. John Legere, T-Mobile’s chief executive, has argued that he would ‘lower prices to attract new customers,’” writes Sui-Lee Wee for the New York Times.

The Federal Communications Commission and the Justice Dept. have yet to weight in on the antitrust aspects of the deal.

“And that’s where some of the main critics of the Sprint and T-Mobile merger are focusing. Opponents of the transaction -- which include Public Knowledge, Dish Network, C Spire, the Communications Workers of America and others -- are now pointing to new research that shows that the removal of a fourth competitor in the nationwide wireless marketplace will cut into retail workers’ wages,” reports Mike Dano For FierceWireless.

For their part, T-Mobile and Sprint have constructed a boosterish site at https://newtmobile.com/ that not only promises “Robust Competition in the 5G Era” but also avers that the combined entity will be “A Job Creator From Day One.” Copy on the home page also projects 600 new T-Mobile retail locations opening in small towns and across rural America.

How will they fund such an expansion? Well, a paper released yesterday indeed offers clues as to one probable “efficiency” to come.

“A merger between Sprint and T-Mobile would cut into the wages of wireless store employees -- including those working at Verizon, AT&T and all four companies’ authorized dealer stores, according to a study released Monday,” Mark Davis reports for the Kansas City Star.

“Average weekly earnings for these retail workers ‘would decline by as much as 7%’ and between 1% and 3% ‘in the bulk’ of the markets affected by the merger, the report released by the Economic Policy Institute and the Roosevelt Institute said. Among the 50 markets hit hardest by a merger, the study found wages could erode by as much as $65 a week, or $3,276 in a year, or as little as $10 a week, or $500 a year.”

So that’s what happens when (communications) workers of the world actually are united.

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