Trump administration economic officials are making it clear they support T-Mobile’s proposed $26 billion purchase of Sprint, a move that could place the Justice Department’s Antitrust Division on a collision course with senior White House advisers if the agency chooses to oppose the merger, the FOX Business Network has learned.
This sentiment from the White House comes amid a flurry of activity surrounding the controversial deal. The Federal Communications Commission’s Chairman Ajit Pai signaled on Monday his agency’s approval for the merger after T-Mobile and Sprint successfully argued to the FCC that the combined company would better compete with wireless leaders AT&T and Verizon on pricing, while making advancements in the area of 5G that will produce millions of jobs and prevent the Chinese from dominating the nascent business.
But the DOJ’s antitrust staff is said to believe that the merger will reduce the number of wireless carriers and lead to less competition and possibly higher prices for consumers, and FOX Business has confirmed that it's pushing the agency’s leadership to block the deal through a federal lawsuit. In order for the deal to move forward, it needs approval from both the FCC and DOJ.
Shares of T-Mobile and Sprint have been whipsawed on the apparently conflicting reports that first made the deal seem near completion and then most recently nearly dead. The wild card in the drama is Makan Delrahim, Assistant Attorney General for the Antitrust Division, who has the final say in the matter and can over-rule his staff recommendation.
Delrahim, who was appointed to the important post in 2017 by President Trump, has made no official decision on the merger, despite reports that his agency is going to move against the deal, according to a White House official with direct knowledge of the matter.
“The staff may not like this deal, but the policy guys have not made a decision and they are the ones that matter,” this person said, speaking on the condition of anonymity.
A spokesman for the DOJ Antitrust Division had no comment.
White House officials who spoke to FOX Business said they believe Delrahim could ultimately support the deal, possibly with additional concessions on top of those T-Mobile and Sprint have already agreed upon to secure three of the five votes needed for FCC approval. All three Republicans on the commission, including Chairman Pai, have said they will support the deal based on the companies’ commitment to not raise prices on wireless services for three years, build superfast 5G networks in rural areas, and divest at least one prepaid brand. The two Democrats on the FCC are unlikely to support the merger.
But Delrahim does face other pressures to nix the transaction, including the possibility that state attorneys general in California and New York may oppose a transaction that his staff is recommending he should oppose as well. One possibly ominous sign for deal proponents: officials from DOJ’s antitrust division have met with officials in the New York and California AGs offices, suggesting the three could join forces on a deal-blocking lawsuit.
If Delrahim decides to oppose the T-Mobile-Sprint merger, he may score some points with liberal advocacy groups and his staff who believe the transaction is bad for consumers, but he will also be butting heads not just with Pai but White House political advisers he may need to keep his job in the Antitrust Division.
Senior White House economic officials are said to be convinced that the simple reduction of one wireless carrier won’t lead to higher prices for consumers since Sprint is the weakest of all the major players and doesn’t have the scale to effectively compete with bigger outfits. They also have largely sided with the company’s arguments that a strong single firm can mount an aggressive price-cutting campaign against AT&T and Verizon.
And if Delrahim does decide to block the merger, he would also be setting a precedent. Antitrust experts are at a loss to recall a single instance where the DOJ has killed a deal that has been publicly supported by the FCC. Meanwhile, given Delrahim's power to approve mergers across the spectrum, any move to block the deal would have a chilling effect on other mergers that would also put him at odds with free-market types in the Trump administration.
“There is no precedent at all where the FCC approved a merger but DOJ then sued to block,” said one industry veteran with knowledge of the deal. “DOJ splitting from the FCC’s course would have a dramatic chilling effect on any future M&A that requires both FCC and DOJ approval. Future merging parties wouldn’t know who to trust.”