The Department of Justice’s antitrust chief told FOX Business on Tuesday that a key factor in determining the fate of the proposed Sprint-T-Mobile merger is the increasingly precarious financial position of Sprint, which some analysts say might not survive without the deal.
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The $26 billion deal is in regulatory limbo as officials from the antitrust division study whether the transaction will lead to price increases since it would reduce the number of major wireless carriers. The Federal Communications Commission must also review the merger but the biggest obstacle to the deal is the DOJ, which conducts a detailed examination of whether such deals harm consumers.
Antitrust chief Makan Delrahim, at the Milken Institute conference, told FOX Business exclusively that company officials have alerted the DOJ that without the deal Sprint’s future is clearly in doubt and that there are questions whether the company will be strong enough to effectively compete with other major wireless players such as AT&T, Verizon and its proposed merger partner T-Mobile.
They’ve also stressed that by combining with T-Mobile, Sprint's future would be secure. Without the merger, the marketplace could still be dominated by three major players given Sprint's weak financial position. Delrahim referred to it as the “failing company defense."
The failing company defense, is "a factor that we consider,” Delrahim told FOX Business. “Whether or not it meets the legal standards that we have to consider is a different story.”
Delrahim confirmed to FOX Business that officials from Sprint and T-Mobile “have discussed" Sprint’s ability to survive in the increasingly competitive wireless market, particularly as wireless carriers seek to develop super-fast 5-G technology that could add millions of jobs and hundreds of billions to the U.S. economy. When asked how high up on the DOJ's list of merger-review concerns Sprint’s financial condition is, Delrahim stated: “Well, it’s certainly part of the review.”
Press officials from Sprint and T-Mobile had no immediate comment. Sprint is considered the weakest of the four major wireless carriers. In a recent corporate filing, the company described its financial position this way: “Sprint is not on a sustainable competitive path."