Executives at Sprint (NYSE:S) and SoftBank are reconsidering their plans to attempt a merger between T-Mobile US (NYSE:TMUS) and Sprint in the wake of significant regulatory opposition to the proposed transaction, according to a new report from the Wall Street Journal.
According to the WSJ, which cited unnamed sources familiar with the issue, SoftBank chief Masayoshi Son and Sprint CEO Dan Hesse are going to use the next few weeks to regroup and re-evaluate their options. The report indicated they may still push forward with their proposed merger of Sprint and T-Mobile, but will take the next few weeks to refine their legal and regulatory arguments for the transaction. The WSJ report noted that both Son and Hesse were surprised by the amount of resistance they encountered from the FCC and Justice Department to the merger of Sprint and T-Mobile as a way to more effectively compete against market leaders AT&T Mobility (NYSE:T) and Verizon Wireless (NYSE:VZ).
According to a number of reports during the past several weeks, Son and Hesse have shopped the merger as a way to give Sprint the necessary scale to effectively challenge AT&T and Verizon. But, according to reports, federal officials have rejected that argument, largely based on the recent success T-Mobile has had in the U.S. market with its "uncarrier" marketing and pricing strategy. Son and Hesse have countered that T-Mobile's achievements likely will be short-lived and that Sprint and T-Mobile won't be able to stand against the much larger weight of AT&T and Verizon unless they unite.
Indeed, Sprint and SoftBank have reportedly been taking concrete steps toward the acquisition of T-Mobile; just last week Dealreporter published an article claiming that Sprint was close to securing $45 billion in debt financing from a group of banks to make a bid for T-Mobile.
But officials at the Department of Justice--the same agency that filed a lawsuit against the proposed merger of AT&T and T-Mobile in 2011--are opposed to the idea of a merger between Sprint and T-Mobile. William Baer, assistant attorney general for the Justice Department's antitrust division, even publicly stated the agency's concerns, arguing that consolidation among Tier 1 wireless carriers in the United States would reduce options for consumers.
As for the FCC, which would also need to sign off on a merger, Chairman Tom Wheeler has reportedly stated his desire to retain four nationwide wireless carriers.
It remains to be seen whether Son and Hesse will push forward with their bid for T-Mobile. According to the WSJ, Son won't pursue a transaction he deems impossible.
Regulatory officials declined to comment on the WSJ's latest report, the publication noted, and Sprint too declined to comment, according to Cnet.
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