The analysts at Wells Fargo said they now give the proposed merger between Sprint and T-Mobile a 70% chance of happening, a figure up from 60% previously.
“Our recent [Washington] DC checks make us more confident that the S-TMUS merger will be approved,” the analysts wrote in a note to investors this week. “Our checks continue to indicate that S / TMUS regulatory review remains fairly drama-free thus far. Contacts indicate that the FCC review continues to proceed as expected. While the DoJ is admittedly a walled garden, most contacts we spoke have not heard chatter coming out of the agency which would suggest there exist insurmountable barriers in completing this marriage. Most, however, do believe there will be required spectrum divestitures to get the deal over the finish line. In terms of timing, two checks indicated if the path continues as planned, it is not out of the realm of possibility to see approvals by Q1’19.”
Both T-Mobile and Sprint are scheduled to report their third-quarter earnings this week, and executives from the companies may give additional updates on the progress of their proposed merger. The companies reached a merger agreement in April, and since then have been working with the FCC, Department of Justice and other regulators to obtain approval for the transaction. Sprint and T-Mobile executives continue to maintain they expect approval for their transaction sometime in the first half of next year.
That said, there remains opposition to the transaction. For example, the Communications Workers of America (CWA), Public Knowledge, Free Press and the Rural Wireless Association scheduled a press call this week to reiterate their position that the merger will ultimately hurt consumers and workers at the carriers. And Dish Network this week also reiterated its argument that the merger will stifle competition in the wireless market.
But perhaps more importantly, the New York Attorney General’s Office is stepping up its probe into the proposed merger, according to a new report in the New York Post, due to concerns that the merged company would raise prices on prepaid services. Sprint operates the Boost and Virgin prepaid brands, while T-Mobile recently rebranded its prepaid offering to “Metro by T-Mobile.”
As the publication noted, the New York Attorney General’s office last week asked the FCC for all materials T-Mobile has submitted to the agency since announcing the merger, and plans to share those materials with other state attorneys general that are investigating the merger, according to an FCC notice.
Indeed, Sprint and T-Mobile’s prepaid operations appear to remain one of several sticking point among opponents of the transaction. And T-Mobile executives have offered some seemingly contradictory comments on how the merged company would approach the prepaid space. For example, in August T-Mobile executives said that the merged company would “retain T-Mobile’s and Sprint’s current prepaid brands as they target different types of customers.” But a filing from the company in September appeared to lump the Boost, Virgin and T-Mobile prepaid brands into one brand entity. A T-Mobile spokesperson declined to provide details of the heavily redacted filing from September, and referred questions on the topic to the August filing.
Other sticking points in the merger—areas that might be affected by regulatory conditions or divestitures—could be the companies’ spectrum holdings, its MVNO terms of service, and how it might handle workforce redundancies.