Federal Shutdown Seen as Delaying T-Mobile/Sprint, But Not Derailing It

T-Mobile and Sprint executives are taking the prolonged partial federal shutdown in stride, though there's an effective pause in reviewing the deal at the FCC and DOJ, said lawyers familiar with their strategy. Analysts say as long as regulators go back to work in a somewhat timely manner, the shutdown shouldn’t be a major threat, although it will inevitably delay resolution. Some aren't convinced government will OK the deal (see 1901140017), while others expect approval. And T-Mobile caught some heat for executives staying frequently at a Trump hotel down Pennsylvania Avenue from the White House starting shortly after the deal was announced.

Leaders at T-Mobile and Sprint must continue to be patient, said telecom consultant Grant Seiffert. “It’s a process,” he said. “There’s not much they can do about it.” The frustrating thing for the companies is that decisions tied to a timeline get delayed, he said. “It’s costly. Time in Washington is money. That’s probably something they don’t want to do is spend more money on Washington, D.C., decision-making.”

“I don't think the shutdown has that great of an effect,” said telecom adviser John Strand of Strand Consult. “The shutdown gives T-Mobile/Sprint more time to communicate its message, engage with its supporters and counter those against the merger.” Bigger questions are whether regulators will take the same negative view of T-Mobile/Sprint they took of AT&T/T-Mobile and or find the transaction should lead to “dynamic competition,” Strand said.

Sprint parent SoftBank “is willing to wait as long as it takes to get this deal approved,” said BTIG analyst Walter Piecyk. “Without a T-Mobile acquisition, Sprint’s future is in question.”

“Other than simply making a long process even longer, I’m not sure it matters much,” agreed MoffettNathanson's Craig Moffett. “There’s no reason to think it would change the ultimate decision.” One wild card is that a slowed federal decision could lead the California Public Utilities Commission to push back its decision, Moffett said: “They seem to want the final word here.”

“There is no way they could go ahead and consummate without government approval so they really have very few options other than to let the process run,” said antitrust expert George Hay, Cornell Law School professor.

The shutdown is unlikely to last long enough to have a negative effect on the transaction, said Fred Campbell, director of Tech Knowledge. “With no end in sight, I’m not as sanguine,” said a former FCC spectrum official.

The prolonged government shutdown left the deal "in limbo, but ultimately I still expect it to go through,” emailed Tom Struble, R Street Institute technology policy manager. Delay could help the companies, as they reframe it not as a four-to-three transaction but as a two-to-three one, where a third strong competitor will now be able to compete with AT&T and Verizon, he said. “While all four carriers were doing reasonably well a few years ago, Sprint started falling off in late 2017 and has been struggling ever since, losing both subscribers and market cap.”

Struble offered a caveat. If the shutdown continues for a very long time, “at some point, the FCC and DOJ may run out of time and be unable to get the merger review completed before the 2020 election cycle ramps up,” he said. “If that's the case, I wouldn't be surprised to see Democratic presidential candidates coming out strongly against the deal and making it part of their campaign platforms.”

T-Mobile CEO John Legere and other executives frequently stayed at the Trump International Hotel in Washington, owned by President Donald Trump. Legere told The Washington Post he liked the service at the hotel and wasn’t seeking favor from the administration. FCC Commissioner Jessica Rosenworcel tweeted in response, “This does not look good.”

"The T-Mobile senior leadership team stays at a variety of hotels in D.C, and across the country -- and they are chosen primarily based on proximity" to meetings, a spokesperson emailed: "We have complete confidence that regulators will assess our merger through an objective and fact-based process and ultimately see how beneficial it will be" to U.S. consumers.