DOJ Signals Skepticism Over Sprint Acquisition Of T-Mobile

DOJ Signals Skepticism Over Sprint Acquisition Of T-Mobile
By Sprint Nextel [Public domain], <a href="">via Wikimedia Commons</a>

Department of Justice officials sounded a warning that Sprint Corporation (NYSE:S)’s acquisition of T-Mobile US Inc (NYSE:TMUS) could meet with ‘intense scrutiny’ and regulatory difficulties.

According to Ryan Knutson and Brent Kendall of The Wall Street Journal it doesn’t appear the meeting has deterred Sprint Corporation (NYSE:S)’s board member Masayoshi Son, who has been the driving force behind the merger effort.

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Sprint’s effort to acquire T-Mobile

Softbank Corp (OTCMKTS:SFTBF) (TYO:9984) has been looking to have its recently acquired U.S. unit Sprint Corporation (NYSE:S) take a majority stake in T-Mobile. According to media reports, the deal would be valued at about $20 billion – in line with the $21.6 billion SoftBank Corp paid for Sprint this summer. The deal would help the Tokyo-based company leapfrog U.S. rivals Verizon Communications Inc. and AT&T Inc. (NYSE:T) to become the world’s No.2 mobile carrier by revenue.

Citing people familiar with the matter, The Wall Street Journal report Softbank Corp (OTCMKTS:SFTBF) (TYO:9984), which bought a majority stake in Sprint Corporation (NYSE:S) and Deutsche Telekom AG (ADR) (OTCMKTS:DTEGY) (ETR:DTE), the German company that owns about 67% of T-Mobile, have been in talks about merging the U.S. carriers.

Justice Department antitrust officials, who review deals for possible harm to competition, are known to welcome meetings with executives ahead of mergers and acquisitions, but they usually are careful not to signal their views on a deal too strongly before giving it a full review.

DOJ’s skepticism

It has been reported that the DOJ was skeptical about a Sprint-T-Mobile combination. Sprint is the third largest carrier in the states, while T-Mobile US Inc (NYSE:TMUS) ranks fourth. But T-Mobile has been leading the industry in innovation and the other three majors in the U.S. have found themselves copying the operator’s Uncarrier initiatives. Moreover, the mobile operator also offers the lowest prices among the top four stateside carriers. The Justice Department might not want to see U.S. consumers lose this combination of low prices and consumer friendly ideas.

T-Mobile US Inc (NYSE:TMUS) was very nearly bought by AT&T Inc. (NYSE:T) back in 2011, but the deal fell apart primarily due to intense scrutiny from antitrust officials at the DOJ and FCC. Sprint and T-Mobile would need to demonstrate that a deal would increase competition.

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