T-Mobile’s pricing commitment backfires, unifies critics

T-Mobile CEO John Legere made a fresh commitment to maintain or cut prices for at least three years if the company's proposed merger with Sprint is approved. (T-Mobile)

With a hearing on Capitol Hill approaching and regulatory review still underway, T-Mobile and Sprint are trying to dampen efforts to block their proposed merger by making a new pledge to maintain or cut prices for three years if the deal is approved. In a new filing with the FCC (PDF), T-Mobile CEO John Legere argued that there is no incentive to increase prices because rate increases would cause irreparable harm to the company.

He took things a step further with a promise of sorts, and wrote that he would be willing to retain current prices as a condition for the FCC’s approval of the merger.

“I want to reiterate, unequivocally, that New T-Mobile rates are not going to go up. Rather, our merger will ensure that American consumers will pay less and get more,” he wrote. “If we broke faith by raising rates and cutting back benefits, we would lose our loyal customers and destroy the future of our brand.”

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A group of companies and unions opposed to the merger, the 4Competition Coalition, called it a “bogus” pledge with no verifiable enforcement. “Committing to not raise ‘rate plans’ for three years is an empty promise that does not provide any real price protection for consumers,” the group wrote in a prepared statement.

“The company’s pledge is riddled with loopholes and ensures that any network improvements will allow them to justify higher monthly bills, effectively rendering the pledge meaningless,” the group added. “T-Mobile knows that its merger is in trouble. Their response—inviting agencies to regulate their behavior—seeks to impose precisely the kind of behavioral conditions that regulators have found ineffective and unenforceable in past merger reviews.”

At least one research firm says the new commitment is an indication that the deal is on the brink of failure.

“Count us in the less likely camp,” New Street Research wrote in a report to investors. While the concession may have been requested from the Department of Justice or FCC in exchange for supporting the deal, it’s unlikely, according to the firm.

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“Generally when it comes to mergers, the first side to offer concessions is likely to be the side that is losing,” New Street’s analysts wrote. “That is not always the case but implicitly conceding that market forces alone are not sufficient to constrain prices is not a sign that the economic arguments at the DOJ about the impact of the deal on competition are working.”

The firm also says such a commitment would typically occur near the end of the regulatory approval process, which is still ongoing. “That T-Mobile feels it needs to reinforce the no price increase message now and in this way suggests to us that it was not part of the final handshake on getting the deal approved,” analysts at New Street conclude.

Despite growing headwinds of discontent, Legere is staying on message and trying to win favor in the general public and halls of government. “To remove any remaining doubt or concerns about New T-Mobile’s prices while we are combining our networks over the next three years, T-Mobile today is submitting to the commission a commitment that I stand behind—a commitment that New T-Mobile will make available the same or better rate plans for our services as those offered today by T-Mobile or Sprint,” Legere wrote. “We believe this merger makes consumers better off, and we’re willing to put our money where our mouth is.”