Jobs an Issue in T-Mobile/Sprint Amid Indications More Announcements Could Loom

Jobs remain an issue in T-Mobile's buying Sprint, stakeholders agreed. They differ on whether the deal would lead to more employment or hurt unionization. At the Capitol Forum Thursday and in Q&A with us, those for and against the deal expanded on existing policy positions. Topics included rollout of attorneys general backing the transaction after reaching pacts for the combined company to locate jobs in their states.

A few states have inked such pacts. Before the panel, T-Mobile voluntarily promised 1,000 New York jobs (see Notebook below this report). That state didn't abandon its court case, set for Dec. 9 trial. The suit's challenging T-Mobile/Sprint and divestitures to Dish Network agreed to with DOJ. Mergers and acquisitions lawyers agreed this pits judges' usual deference to government against deal opposition from state AGs, while other attorneys general and DOJ support the takeover.

Cooley's Robert McDowell, who works for T-Mobile on FCC review, raised but not seriously a possibility of a sort of union neutrality. That was only to make the point that a telecom union's opposition to the transaction is in his view a bid to increase membership as opposed to a legitimate antitrust concern. In neutrality, as stakeholders said was agreed to when AT&T tried to buy T-Mobile years ago, management mightn't try to sway workers for or against a union. On a panel that also included Communications Workers of America Research and Telecommunications Policy Director Debbie Goldman, McDowell noted there could be fears unionized carriers AT&T and Verizon would perhaps lose customers if a combined T-Mobile/Sprint snags subscribers. That could hurt unionization. An AT&T spokesperson emailed that the telco "would have offered [T-Mobile] workers neutrality and the opportunity to unionize."

CWA "would love to have a direct conversation with John Legere about respecting workers' rights at T-Mobile," Goldman responded to McDowell, regarding that carrier's CEO. On offshoring versus onshoring U.S. call center jobs, Goldman said AT&T/T-Mobile would have brought such jobs back to this country. By contrast, "T-Mobile and Sprint offshore tens of thousands of call center jobs," she said. "That they are trying to woo states" with about four call centers so far with several thousand jobs lacks "accountability," the union representative said. "They have not made that commitment to a regulatory agency with any oversight to ensure that happens. They could be bringing back a lot of jobs."

McDowell hopes for more job-type pacts with additional state challengers to T-Mobile/Sprint, he responded to us. Some 16 states are "still involved in the litigation and I hope all 16 states give up the litigation before Dec. 9," he said. The lawyer said the transaction will bring jobs. He thinks states "will lose if indeed this goes to trial." There was "kind of a belt-and-suspenders approach" by the FCC and DOJ that OK'd the deal with conditions, McDowell said. He didn't think conditions were needed.

Goldman believes "state AGs have a very strong case" in going to U.S. District Court in the Southern District of New York, she told us. She thinks the hundreds of lawyers, economists, public relations practitioners and others working for T-Mobile on the combination "are aggressively having meetings now to try to convince the states." Pacts with Colorado, Florida and Mississippi are "really still leaving many, many people outside" of buildout commitments she termed "really weak."

Dish Viability

"There's a lot of buildout opportunity" for Incompas members including with the combining carriers' 5G networks and Dish's building one, said the association's general counsel, Angie Kronenberg. Dish Chairman Charlie Ergen said last week at the group's show (see 1911050016) "they’re not going to have the cost from having to transition from other generations" of cellular to fifth-generation, she noted. There's opportunity for what she called software and cloud assets and physical infrastructure, too. Sprint was a founding member of Incompas, Dish is a member and Kronenberg spoke on behalf of her overall association.

Incompas initially had concerns about T-Mobile/Sprint over wholesale arrangements. "We weren’t really able to get the issue addressed without the Department of Justice’s help," Kronenberg said. Now, there's an agreement that would last seven years, she noted. Conditions would be enforceable for four years beyond that, McDowell noted: One could go to court to enforce terms.

The deal provides "huge incentive for Dish to build out its wireless business," McDowell said. Kronenberg said the satellite-TV provider has disrupted other businesses and could do so again. T-Mobile also has "been a disrupter," McDowell said: That "DNA won’t change."

One has "to be the tooth fairy to believe that Dish will be a viable fourth wireless competitor," said Goldman. "Dish is not in good shape. It has been steadily losing customers. It is highly and increasingly leveraged, much more than Sprint." She cited analyst reports. Ergen "has been hoarding spectrum now since 2008," the union rep said. He would get "another number of years" more under the deal to build out that could let airwaves lie unused for 16 years, she said. Dish like Sprint wasn't represented on the panel. Sprint and T-Mobile declined to comment.

Dish "has never missed a final terrestrial spectrum buildout deadline," emailed Senior Vice President-Public Policy and Government Affairs Jeff Blum. Its March 2017 "decision to forgo the interim milestones for its AWS-4 and 700 MHz spectrum actually accelerated its final buildout requirements," he added. In T-Mobile/Sprint, Dish would "deploy its 600 MHz spectrum four years earlier than previously required," in a new FCC commitment "to deploy a 5G broadband network to at least 70 percent of the U.S. population by June 2023." DOJ's settlement and Dish's FCC commitments position the company "to become the fourth facilities-based network operator, preserving competition for consumers both today and as the 5G ecosystem develops," Blum said.

Union Neutrality

In a later interview, Goldman slammed T-Mobile and the FCC.

"There’s absolutely no indication" the company would agree to be neutral on unions, she said. She said another union's rep on T-Mobile parent's German board "has for years been talking on the board" and "saying that T-Mobile needs to talk to CWA. That message has been delivered for years. John Legere is very aware."

Goldman noted Commissioner Jessica Rosenworcel's dissent on 3-2 FCC OK of T-Mobile/Sprint raising process and transparency concerns (see 1911050055). "We are looking carefully at that," Goldman said.

"You can challenge the process as a violation of" the Administrative Procedure Act, Goldman said in an interview, speaking hypothetically. She wouldn't say if such a court case will come or if CWA would join it. T-Mobile ex parte filings gave "no idea what" was discussed with commission officials, she said. The FCC declined to comment.

A typical CWA neutrality agreement involves a company's telling managers it takes no stance and won't "assist nor hinder the Union on the issue of Union representation," emailed a spokesperson for the labor organization. Executives won't "express any opinion" on such "representation of any existing or proposed new bargaining unit, or for or against the Union or any officer, member or representative" in that capacity, say such pacts. Management wouldn't discuss "potential effects or results of Union representation on the Company or any employee or group of employees."

Court Case

Antitrust and M&A lawyers will be interested to hear what comes out of the trial.

Speaking on a later panel, they agreed it's not clear which side will win. A complicating factor is that the government, which judges may defer to, is on both sides of the case.

"Will the judge defer to the federal agencies," asked Akin Gump's Corey Roush. "Or will he defer to the states who are bringing the case?" Here, "we just don’t know what way that deference is going to go," he said. The case "suggests that reasonable minds can disagree about the right outcome here," said Michael Perry of Baker Botts, who isn't part of the proceeding. "Efficiencies here are a really important part of the case" for combining the carriers, he said. "You want to establish a counter-narrative to what the government is putting forward," he said of AGs wanting to torpedo the deal.

There's more precedential value if the deal and what the lawyers called its fixes are upheld, some said. A ruling for the defendants lends more credence to efficiencies in transactions, Roush told us in Q&A, noting his firm isn't part of this proceeding. If the companies can proceed, there's more precedential import, he said. "Because you will have a judge having approved it." As "a merger litigator, I’m always hopeful that good precedent will come out of this."

One economics professor is skeptical of the deal. Noting antitrust enforcers have sought a four-carrier wireless market, Northeastern University's John Kwoka said it could take the seven years of a DOJ condition to see if Dish could become a fourth competitor.

The transaction remedy "is really the fulcrum on which this entire case" rests, said Kwoka. There are "lots of moving parts. It's really a jigsaw puzzle," he said of the remedies. "Whether they all fit together and as a result turn Dish into an effective nationwide wireless competitor is the question." He called divesting prepaid wireless operations to Dish "a structural divestiture [that] really overlooks the fact that it's rebranding Sprint’s prepaid services for quite some time." Kwoka told us he hasn't been paid by anyone to take a stance on T-Mobile/Sprint. The American Antitrust Institute senior fellow has written for AAI against the takeover and commented at DOJ.

M&A Notebook

T-Mobile promises 1,000 New York customer support jobs at a facility to be opened in Nassau County after its Sprint buy closes, the company said Thursday. New York's the lead state challenging T-Mobile/Sprint at the U.S. District Court. New York AG Letitia James (D) declined comment. There were other deal sweeteners last week (see 1911070066).

Dish opposed public advocates’ motion to compel responses to data requests about T-Mobile/Sprint (see 1911060021). Dish already “substantively and sufficiently responded to each and every” data request by the California Public Advocates Office, the company told the California Public Utilities Commission Wednesday in docket A.18-07-011.