T-Mobile/Sprint approval odds may be improving, but prepaid stands as sticking point

Closeup of video poker machine screen
Analysts continue to place bets on the Sprint and T-Mobile merger. (Kateywhat / iStock / Getty Images Plus)

One Wall Street research firm said it believes the odds that regulators will approve the proposed merger between Sprint and T-Mobile are improving. But the operators are increasingly facing questions around how their transaction might affect the prepaid market.

“After multiple discussions with some D.C. contacts, we are more optimistic on the odds of deal approval,” wrote the analysts at Wells Fargo in a note to investors this morning. The note came one day after the top executives from Sprint and T-Mobile testified during a Senate hearing to review the companies’ proposed merger. “In our view, we believe the FCC in particular will be open-minded and view the competitive environment through a wider lens. In our view, the T/TWX approval also showed an acknowledgement that the competitive environment and landscape has rapidly changed over the past few years.”

However, that outlook stands apart from a recent forecast provided by Blair Levin, an analyst for Wall Street’s New Street Research, to The Wall Street Journal. Levin told the publication that the odds slightly favor the deal getting blocked, though uncertainty continues to dog the process.

Importantly, the WSJ also reported that the New York attorney general’s office is currently investigating how T-Mobile’s deal to purchase Sprint might impact the prepaid, pay-as-you-go wireless market. The publication, citing an unnamed source familiar with the matter, added that dozens of other state attorneys general are part of the probe.

The WSJ reported that Sprint and T-Mobile declined to comment on its report.

However, T-Mobile’s John Legere addressed the topic during his Senate appearance, arguing that “we have not suggested any change, per se, in the MetroPCS, Boost and Virgin brands,” in relation to the merger. He added that, following T-Mobile’s purchase of MetroPCS, the company invested further into the prepaid sector, and that both Sprint and T-Mobile today charge prepaid customers in a similar manner to postpaid customers.