According to the Wall Street analysts at Macquarie Research, the odds are improving for a merger between Sprint and T-Mobile. However, the firm cautioned that the companies may be required to conditions or asset divestitures in order to obtain final regulatory approval for their transaction.
Specifically, the analysts pointed to a relative lack of opposition to the transaction among some of the biggest names in telecom, including Comcast and Verizon.
“We believe the odds of deal approval are rising and attention is now shifting to potential conditions/remedies,” the Wall Street analysts wrote in a recent note to investors. “However, the backdrop doesn’t seem to support spectrum or subscriber divestments. Charter is focused on 3.5GHz and the FCC is bringing mmWave/C-Band to market beginning in Nov. 14th. As for buildouts, T-Mobile is committed to a nationwide 5G network by ‘20 and delivering 100Mbps+ speeds to ~90% of PoPs.”
The analysts also said that the relative silence from the likes of Comcast and AT&T -- which declined to take sides on the merger, indicates that telecom market could be the scene of further M&A.
“Those who remained silent likely did so: 1) to maintain optionality around future deals where they could look to get bigger in their respective industries; and 2) because they’re all fighting their own regulatory battles,” the analysts wrote.
The Macquarie analysts said that Comcast and Charter (which also didn’t take a position on the merger) likely did so because they are content with their MVNO deal with Verizon and therefore have no interest in whether Sprint and T-Mobile merge. And the analysts said that AT&T and Verizon aren't taking a position because “a three-player market where the disruptors merge could bring discipline/repair to the industry.”
The initial batch of comments on the proposed merger between Sprint and T-Mobile rolled into the FCC earlier this week. Leading opposition to the deal were the likes of Dish Network, C Spire and cable company Altice, which the analysts said is likely working to protect its planned launch of mobile services through its MVNO agreement with Sprint.
For their part, Sprint and T-Mobile both argue that a merger between the nation's third and fourth largest wireless network operators would not only enhance competition in the wireless industry but would in fact force AT&T and Verizon to move more quickly on their own 5G network efforts. Sprint and T-Mobile also argue that their merger would result in a net increase of employees, as well as a major 5G network build-out thanks to the combination of T-Mobile’s 600 MHz spectrum and Sprint's 2.5 GHz spectrum.
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If the companies do indeed obtain regulatory approval for their transaction, the analysts at Macquarie said that Sprint and T-Mobile may face conditions or asset divestitures in order to obtain approval. Such conditions could stretch from spectrum divestitures to a requirement that the companies remain open to the wholesale and MVNO market.
Indeed Boost founder Peter Adderton recently met with some of the top commissioners at the FCC and argued that “the anticompetitive and harmful public impact of the proposed merger can be effectively mitigated by the divestiture of one of the prepaid brands and transfer of approximately 8 million customers to an independent operator.” Perhaps not surprisingly, Adderton has said in the past that he could be the chief executive of this kind of prepaid business if it were divested.