Officials at the Federal Communications Commission met Thursday to discuss possible conditions for T-Mobile’s $26 billion merger with fellow wireless carrier Sprint, an indication that discussions with the government have reached a critical stage, the FOX Business Network has learned.
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The hours-long meeting at FCC headquarters in Washington, D.C. is seen by people inside the companies as a somewhat positive development for a deal that has run into regulatory headwinds, according to people with direct knowledge of the matter. Government officials have worried about the potential consumer implications of reducing the number of wireless carriers if the merger is approved.
But Thursday’s talks were described as constructive and involved possible proposals by the company to sell off business or make other arrangements to gain regulatory approval, these people said. It could not be determined what conditions the companies proposed to government officials.
Jonathan Chaplin, an analyst at New Street Research had been skeptical of the deal’s chances until word of the constructive talks began circulating on Wall Street. Chaplin tells FOX Business that “Up through last week we were bearish on the merger getting approved; now we are closer to giving the merger a fifty-fifty chance of going through.”
Spokeswomen for Sprint, T-Mobile had no immediate comment. A spokesman from the FCC declined comment.
The merger of the wireless giants is one of the most closely watched deals on Wall Street. Company officials say the deal is necessary to create a strong combined outfit that can compete against Chinese outfits like Huawei in the battle to develop super-fast 5G wireless technology, which could produce millions of jobs and add significantly to economic growth.
T-Mobile and Sprint have tried and failed in the past to gain regulatory approval for a merger but went back to the government thinking they might have more luck with the business-friendly Trump Administration. The deal needs approval from the FCC and the DOJ’s Antitrust Division, and company officials have been meeting with officials from both agencies in recent months as the timeline for approval draws near.
The FCC has a “shot-clock” or time frame for a decision on the merger of early June. The DOJ is expected to make its decision at around the same time. The FCC’s metric for deal approval is whether the merger is in the public interest, while the DOJ is looking strictly at whether the combined company, which reduces the number of major wireless carriers to three from four, will lead to price increases and an anti-competitive market for consumers.
However, the two agencies are working closely together on the deal and are expected to be aligned in their decision about whether to approve the merger.
Company officials have argued that combining T-Mobile with Sprint will make for a stronger single company that will be better able to engage in price competition with the other top wireless companies, AT&T and Verizon.
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|VZ||VERIZON COMMUNICATIONS INC.||59.98||+0.05||+0.08%|
The continued merger discussion comes as President Trump on Wednesday signed an executive order that effectively bans Huawei from selling telecom equipment and services in the United States. White House economic officials have been said to support the T-Mobile merger with Sprint because of the combined company’s potential to compete with the Chinese even as regulators have taken a more skeptical position.
Meanwhile, even as the FCC and the DOJ antitrust staff have expressed concerns over the proposed merger, company officials might have another ally in the Trump Administration: Assistant Attorney General for the Antitrust Division Makan Delrahim.
Delrahim can approve the deal without the consent of the antitrust staff, and he is said to be open to at least two key arguments made by officials at the telecom companies: First that approving the merger would help the U.S. compete in the global race to lead 5G, according to people with knowledge of the matter.
The other argument Delrahim is said to be open to involves the so-called “failing firm defense,” these people add, FOX Business has learned. T-Mobile and Sprint officials have argued that without the deal, Sprint’s more precarious financial standing could ultimately doom the company given the deep-pocketed competition in the 5G race.
A spokesman for DOJ antitrust had no comment.