After the closing arguments, the T-Mobile/Sprint merger case leans towards a deal block

After the closing arguments, the T-Mobile/Sprint merger case leans towards a deal block
During Wednesday's closing arguments, lawyers for T-Mobile and Sprint presented their case in the state AG trial against their merger, and we are a few weeks away from the verdict. US Judge Victor Marrero, however, didn't ask a single question during the four-hour marathon, say New Street analysts who gained access to the trial in the hope that his comments or questions would point them towards his eventual opinion.

Previously, they have been sceptical about the merger chances in its current state of affairs, and the laconic judge didn't help dissuade that conviction. Wall Street analysts are also now bearish on the chances of a New T-Mobile forming from the ashes of Sprint, and this has been indicated in the record spread between the carriers' stock prices.

Sprint is trading at more than 40% discount to the price that T-Mobile is prepared to pay for it in the now-$34 billion merger, much to the chagrin of John Legere, who is stepping down as T-Mobile CEO in the spring. With his usual positive outlook, he issued the following tweet at closing day:


Optimism, however, is not enough of a superpower in court, and after sitting for the good portion of the day in court, New Street analyst Blair Levin issued a memo (subscription req'd) to clients, obtained by Fierce Wireless, breaking down the real possibilities of a merger to go through. First, Blair's recap of how the final day in court went, according to his impressions:


The metaphors in question may sound funny to anyone who is not initiated in the court's lingo - the state AGs' lawyer referred to T-Mobile as the "flower child" that turned into an investment banker, while the judge likened it to Rocky. 

The carrier's attorney grabbed the reference and made the "T-Mobile is becoming Rocky and stepping into the ring with its larger competitors and developing a new punch" sentence with it. Fun for the whole family.

However, California and New York's Attorney Generals Xavier Becerra and Letitia James, who are tasked with representing all the state attorneys against the merger in the trial, got out of it with a final statement after the closing arguments that read:


In the so-called "findings of fact" submitted to the judge beforehand, the Attorney Generals have the upper hand, according to Mr Levin, as they have managed to demonstrate that the FCC and DoJ went with "what appears to be only a cursory examination" of the merger's conditions. They rightfully argue in one of the closing arguments that "the population of the plaintiff states is almost twice as large as the population of the states that have joined the DoJ settlement approving the merger," and thus their own impact research has more weight than the Department of Justice one.

Even DoJ's own 15-month investigation concluded that there will be significant sinergies of scale and efficiencies achieved post-merger, but also concluded that the deal would essentially stifle competition, too. When it comes to the FCC, its approval was also thrown under the bus by the states' attorney who argued that the much-touted divestment of Boost and Virgin to Dish may never materialize as a serious competitor, as some of the FCC's conditions are actually pending with no enforcement power.

All in all, most analysts who read the closing statements and followed the trial to the end, have deduced that the legal arguments of the 14 State Attorney Generals are superior to the ones that the carriers have put forward. 

However, it's ultimately up to Judge Marrero to decide whether he wants to basically scratch the work of over a hundred FCC and DoJ staffers who worked hard on securing the conditions under which the merger can proceed forward. The decision can't come soon enough, and, as usual, John Legere is optimistic about it.


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25 Comments

25. Warrensupporter1

Posts: 4; Member since: Jan 18, 2020

sprint is not weak. softbank is a healthy company with tons of cash.

21. Best_Economy_Ever

Posts: 3; Member since: Jan 20, 2020

Uhhhhhh....AT&T and Verizon DO NOT want any competition. They are the ones pulling the Dicks of the Dem AG's.T Mobile created more competition in the last few years by forcing even Verizon to lower their price to $35. Harm to the consumer? That simply = cost to the consumer. We need three big carriers. NOT TWO.

19. Warrensupporter1

Posts: 4; Member since: Jan 18, 2020

how can anyone not understand that four is better then three.? here is the deal for you you trump loving community college grads. four phone companies is better then three. sprint has deep pockets with softbank. softbank has already said they will not let sprint default on its loans. dish may never be a fourth phone company. they have no means to compete charlie's record is zero and its all wishful thinking. the ftc did not do a full study on the damage this would do. same with the fcc. now the courts will stop this. sprint can be sold or softbank can invest. if tmobile needs more spectrum let them buy it. and all you merger supporters have a happy life in flyover country.

22. Best_Economy_Ever

Posts: 3; Member since: Jan 20, 2020

Your HATE for your fellow Americans is showing.

13. ClifftonKMorris

Posts: 6; Member since: Oct 15, 2017

Because T-Mobile (and not the DoJ Or FCC) selected Dish as a company to acquire spectrum, retail locations and customers, this merger as it stands today, creates a severely weaker VZ and AT&T. And like it or not, the number of AT&T + Verizon customers is greater than “New” T-Mobile as well. Thusly, more customers are affected. Ideally, the spectrum, customers and infrastructure (including Sprint’s ISP and fiber optic business) would NOT have been ASSIGNED to Dish, instead, they would have been AUCTIONED in a public asset sale. The downstream effects to AT&T and VZW customers will be felt for decades. T-Mobile CEO John Legere compared it to kids playing on a swing set, and taking others toys. But T-Mobile didn't only pre-emptively take assets of Sprint, it also assigned who owns them next. It was a very revealing statement; must be how T-Mobile internally operates today. More importantly, if approved, this merger creates new legal precedent for mergers that in the past would have been considered “Presumptively Illegal” under Herfindahl-Hirschman Index market concentration metrics. You’d only be “for” this merger if you like big, ugly, angry companies.

8. Warrensupporter1

Posts: 4; Member since: Jan 18, 2020

looks like the merger is now dead. the people of america have won this. the big losers are softbank and its weird chairman and now impeached Donald Trump with his corrupt fcc. there will be no merger. everyone here at justice was saying this today. TMobile and Sprint presented a weak case with obvious lies.

9. semipro1337

Posts: 117; Member since: Oct 01, 2012

If your username dictates your supporting democratic candidate warren, everything you just said means jack.... The people of America have not won and definitely have not spoken. Democratic AG's have. They don't speak for me.

10. Ene5280

Posts: 3; Member since: Jan 18, 2020

I'm definitely a Warren and Bernie supporter compared to Joe Biden but I'm also a very happy long time T-Mobile customerthis was the one tiny positive thing that I thought may happen under Donald Trump's government. I believe that Sprint will fail T-Mobile won't be able to compete with AT&t and Verizon and after a few years eventually T-Mobile will merge with some company like Comcast. I'll say this just out of spite if this merger doesn't go through I will be donating to the Republican candidates that run against the AG of New York and California. I see how it is Democrats you'll let an AT&t merger go through under Obama but something with T-Mobile nope sorry we can't let T-Mobile get better. You're also screwing over the United States and their 5G capabilities. T-Mobile won't be able to effectively deploy their 5G coverage without some type of merger. having better 5G coverage in this country is more important than a little bit of lost competition because you go from three healthy carriers and one unhealthy one to three healthy carriers and one just beginning to grow. In the last 7 years my bill has gone down from $100 a month for one line to $100 a month for four lines just because this merger went through doesn't mean that T-Mobile is going to magically turn into AT&t and Verizon. Thanks a lot Democrats!

11. semipro1337

Posts: 117; Member since: Oct 01, 2012

Well, I guess if either of those two get in you will get free cell service along with health. Good luck

12. Warrensupporter1

Posts: 4; Member since: Jan 18, 2020

there will be no merger. the deal is dead. the states have stopped it thank god. it will harm the american consumer and the states have stopped it it dead in its tracks. the educated people who understand the way monopolies work have won and the deplorables have lost. next stop gun control!

17. semipro1337

Posts: 117; Member since: Oct 01, 2012

Yes I agree, gun control doesn't work. Trigger control does. But exactly how does Sprint and T-Mobile combining turn into a monopoly? A monopoly is about no consumer choice or forcing one thing on us with no other option.... They would still be number 3, and dish number 4. So when Sprint goes bankrupt and we have only 3 anyway, will you still consider that a monopoly?

23. TadTrickle

Posts: 177; Member since: Apr 08, 2019

Woah, you're definitely an unhinged NPC with TDS

24. Ene5280

Posts: 3; Member since: Jan 18, 2020

Did u support the at&t mergers that went thru under obama? Making at&t stronger was bad so now not letting tmobile to get stronger is bad. I understand your argument but I'd rather have 3 carriers than 4 with tmobile being strong than 4 carriers with 2 strong one medium and one weak.

7. tellucas

Posts: 1; Member since: Jun 08, 2015

Sprint needs to get their plan together If the merger fails. Miss fires such as mal investment in WiMax and loosing the Nextel customers they paid for are fatal blows. Instead of Bankrupting themselves with an inferior 5g build out that wont be competitive they could instead complete a build out of a good 4G-LTE network and leave the bleeding edge speed to others. Then they can just play the price leader angle since they will have lower CapEx and be able to work on that debt load. Im sure there’s a large group of consumers who dont need 5G and find 4G to be adequate for their needs and wouldn’t mind paying less.

6. maximuslyricus

Posts: 8; Member since: Dec 07, 2015

Meh. Sprint doesn't need T-Mobile to survive. Claure said so. It's like the Attorneys General have said: Sprint only needs to roll up its sleeves and get to work to become legitimately competitive. Masa Son sold the American public a bill of goods---snake oil---before SoftBank was allowed to purchase Sprint, & he never came through. The judge needs to force him to come through! If he doesn't want to, then perhaps someone else will.

16. tuminatr

Posts: 1193; Member since: Feb 23, 2009

T-Mobile needs sprint's spectrum and that's what this is all about. I do agree Sprint does not actually need the merger

5. RoryBreaker

Posts: 331; Member since: Oct 11, 2015

This merger NEEDS to go through!

4. txtelecom

Posts: 1; Member since: Jan 17, 2020

I think you may need to make a correction to the above where you reference "that the much-touted divestment of Metro, Boost and Virgin to Dish." Metro does not seem to be part of the divestiture agreement. "Effective upon the successful completion of T-Mobile’s merger with Sprint, the New T-Mobile will be committed to divest Sprint’s entire prepaid businesses including Boost Mobile, Virgin Mobile and Sprint-branded prepaid customers (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Telecommunications Company and Swiftel Communications, Inc.), to DISH for approximately $1.4 billion." See announcement on T-Mobile's news page (I can't post URLs as a new user here) -and- "Under the Justice Department deal, the companies would divest Sprint’s prepaid businesses, including Boost Mobile, to satellite television company Dish Network Corp, and provide it with access to 20,000 cell sites and hundreds of retail locations." See Reuters article on the deal.

3. drazwy

Posts: 380; Member since: Jan 15, 2014

If they lose, expect ATT and Verizon rates to skyrocket. Sprint will fail and Tmo will fall to irrelevancy. Right now they are concerned with the merger. If it fails, they will know they have nothing ever to fear from competition.

15. tuminatr

Posts: 1193; Member since: Feb 23, 2009

I don't think rates will automatically increase if the merger does not go through but I do agree that t-mobile would need to change its market position as the low-cost carrier, well maybe they already have. Sprint currently has the lowest rates but arguably the worst service. Sprint is too big to fail and could be accuired by someone not in the wireless industry maybe xfinity, dish, or ?? That may actually be better for consumers

2. JMartin22

Posts: 2429; Member since: Apr 30, 2013

These Democratic Attorney Generals need to shut the **** up. This deal is only going to help more people than without it. Sprint is going under in a few years if they don’t get this deal passed and it’s going to be the big 2 who buy up all the spectrum from the ashes, further strengthening the big 2.

14. tuminatr

Posts: 1193; Member since: Feb 23, 2009

I don't agree Sprint is too big to fail they would probably be sold or acquired by a player that is not in the wireless game if this does not go through (dish network or ??), although that would be bad for t-mobile it could be good for consumers. I do not think that ATT or Verizon would be allowed to acquire sprints spectrum

18. db747212

Posts: 1; Member since: Jan 19, 2020

You need to STFU. Republicans are doing all the damage, and that damage is not only to the economy.

20. Best_Economy_Ever

Posts: 3; Member since: Jan 20, 2020

Economic Professor you are not. You should keep up on current events.

1. veerhardik

Posts: 12; Member since: Feb 23, 2019

they are winning the merger for sure

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