It's deja vu for T-Mobile as DOJ reportedly kills Sprint merger
On April 29th, it will have been one year since T-Mobile and Sprint announced a $26.5 billion merger. For the transaction to close, both the FCC and the DOJ must sign off on it, but that now looks like a long shot. Citing people familiar with the situation, the Wall Street Journal says that members of the Justice Department's antitrust division have told both carriers that the deal, as presently structured, is unlikely to be approved.
The problem that the DOJ's antitrust unit has with the deal is that it could lessen competition in the wireless business by dropping the number of major providers from four to three. As we've pointed out before, this could be looked at both ways. After all, a stronger number three carrier in the form of a merged T-Mobile-Sprint could prevent Verizon and AT&T from raising prices.
In 2011, AT&T pulled out of a $39 billion deal to buy T-Mobile after the merger was blocked by the Justice Department. Three years later, T-Mobile and Sprint decided not to merge after having exploratory talks with the FCC and DOJ. But with the currently proposed deal, both T-Mobile and Sprint at first pitched the merger directly to President Trump as necessary to provide competition to Verizon and AT&T when it comes to the rollout of 5G wireless service in the U.S.
T-Mobile CEO John Legere says that the story in the Journal is "untrue," and T-Mobile executives have been expecting the merger to close before the end of July. That is later than the originally hoped for April closing, but twice the FCC had to temporarily halt its review of the deal. One time was due to the government shutdown, and the other time was due to new information about the merger filed by T-Mobile.
While those critical of the deal worried about job losses, Legere has said that the merger would add to the head count from day one. Store closings and the synergy created by the merger might have normally led to more firings than hirings, but Legere has pointed out that the combined T-Mobile-Sprint would have 130 million customers requiring a hike in customer service personnel. New hires will be needed to staff additional customer service centers, and 600 new stores will open in rural areas and small towns not presently serviced by T-Mobile or Sprint. With that in mind, Legere says that the combined company will hire 11,000 more people by 2024 than if both remain individual carriers.
The news came out after the 4 pm EDT close of U.S. stock markets. In after-hours trading, Sprint was down 8% to $5.53 a share while T-Mobile declined by more than 4% to $71.