T-Mobile and Sprint received a bit of relief on Sunday after New York Attorney General Letitia James announced that her office would not appeal the decision by U.S. District Court Judge Victor Marrero to let their merger proceed.
The New York AG, together with California Attorney General Xavier Becerra, led the fight to block the deal with 12 other attorneys general from around the nation. They had argued that the $26.5 billion transaction was anti-competitive, would lead to higher prices and fewer jobs, to name a few negative ramifications.
“After a thorough analysis, New York has decided not to move forward with an appeal in this case,” James said in a statement. “Instead, we hope to work with all the parties to ensure that consumers get the best pricing and service possible, that networks are built out throughout our state, and that good-paying jobs are created here in New York."
She added: "We are gratified that this process has yielded commitments from T-Mobile to create jobs in Rochester and engage in robust national diversity initiatives that will connect our communities with good jobs and technology. We are committed to continuing to fight for affordability and access for all of New York’s mobile customers.”
Reached via email, an advisor to AG Becerra said: “Our legal team is reviewing the court’s ruling and our options. We are mindful that the California Public Utility Commission also has this matter under consideration.”
In a note to investors last week, New Street Research policy analyst Blair Levin said that since the trial court had ruled, there would be significant pressure for the California Public Utilities Commission (CPUC) to act. The CPUC’s next meeting is March 12. “We don’t dismiss the possibility that the CPUC may provide the states’ attorneys general a short-term opportunity to negotiate a deal similar to deals reached by other states now that the court has ruled for the companies,” Levin wrote.
LightShed Partners analysts last week said T-Mobile had not yet indicated whether it would close the deal without CPUC approval. However, “it is very hard for us to believe that one state can hold up a national deal. It’s comical and frankly embarrassing to the CPUC that they have not yet ruled on this transaction, given an 18 month review process,” wrote LightShed analysts Walter Piecyk and Joe Galone. “Yet, they have until July 12th to complete that review. T-Mobile expects them to promptly conclude their review, which hopefully occurs before April 1st.”
They also noted that Judge Timothy Kelly still needs to sign off on the Tunney Act review of the Department of Justice (DoJ) conditions. Approval from Judge Kelly also starts a 90-day clock under which T-Mobile permits Dish Network to provision new Dish and Boost customers to the T-Mobile network. When that is complete, the divestiture of Boost can proceed, they said.
Analysts are also awaiting the renegotiation of the deal between T-Mobile and Sprint. The Financial Times last week reported that T-Mobile parent company Deutsche Telekom was looking to renegotiate the buying price for T-Mobile’s takeover of Sprint, whose stock and value as a company has deteriorated over the past two years.
The LightShed analysts have repeatedly expressed their view that T-Mobile should renegotiate the price based on the longer-than-expected approval process and the worse-than-expected erosion in Sprint’s business. They said the expiration of the Business Combination Agreement (BCA) on November 1, 2019, offered an opportunity to renegotiate the price.
After Judge Marrero’s decision was announced last week, T-Mobile said it was set to close on the merger as early as April 1, and while the “subject to certain closing conditions” message typically serves as a boilerplate in company statements, the reference in T-Mobile’s press release was worth noting: "The T-Mobile and Sprint combination remains subject to certain closing conditions, including possible additional court proceedings, and satisfactory resolution of outstanding business issues among the parties."