T-Mobile, Sprint extend merger timeline into July

T-Mobile
T-Mobile CEO John Legere (second, from right) was upbeat about the merger's prospects during the company's first-quarter conference call last Thursday. (T-Mobile)

T-Mobile and Sprint extended the deadline for completing their merger to July 29 as they continue to seek the regulatory approvals they need to complete a deal. The extension was revealed in an SEC filing.

T-Mobile CEO John Legere remained confident about the deal’s prospects during the company’s quarterly conference call last week—and he gave no indication that he’s contemplating any major restructurings of the proposed transaction.

Earlier this month, the Wall Street Journal reported that Justice Department antitrust enforcement staff had told the companies that their planned merger was unlikely to be approved as currently structured—a story that both T-Mobile and Sprint executives rebuffed.

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Asked during last Thursday’s quarterly conference call about alternatives on how the deal might be structured, Legere responded that “this deal, as structured, we believe is pro-consumer and pro-competition and as the regulators continue and finish their review process, it will be approved. So you’re referring to alternate universes or structures that I have no reason to think about at this point in time. I feel very good about the deal as it’s structured and as it’s being reviewed.”

This past Monday, April 29, marked the one-year anniversary of the deal’s proposal, and Legere said their enthusiasm for the opportunity was greater than it’s ever been.

At the state level, the deal has received 16 of the required 19 state public utility commission approvals, including the New York PSC, and it’s making progress in California, having reached an agreement with the California Emerging Technology Fund on April 8, according to Legere.

“We continue to work through the regulatory review process, and believe that we are in the final innings of a process that we have a great deal of respect for,” he said. “On the regulatory front, I’m pleased with the progress we have made on our merger and the process so far and I still expect regulatory approval from the DOJ and the FCC in the first half of this year.”

In an appearance on CNBC on Monday, U.S. Assistant Attorney General Makan Delrahim did not give any indication which way he and his team might fall on the matter. “I have not made up my mind,” he said. “The investigation continues,” and the DoJ is waiting for more information from the companies.

Delrahim also said “there is no magical number in any particular market,” in terms of three or four—for what makes for a competitive market. There are other things to consider, such as efficiencies that a merger provides that couldn’t otherwise happen and the fact that in an industry like cellular, there are regulatory barriers to entry. “It is what the facts and economic evidence show us,” he said.

In a note to investors on Friday, New Street Research analysts said the big question remains what kind of structural remedy is in play. “If it is one simply to address the prepaid market, such as divesting a prepaid brand, that is relatively simple and not material to the long-term market structure or value created by the deal,” they wrote. “If, however, as we think more likely, the structural remedy needs to remedy the loss of a facilities-based provider, it is much harder to develop a remedy that would be acceptable to the DoJ and T-Mobile.”

They followed that up with a longer note on Monday marking the one-year anniversary, and noted that Nevada had joined 17 other states that are monitoring the deal and that may join in a suit to block it, either with or without the federal government.

They concluded: “Our bottom line is where it was last week; the deal is unlikely to be approved as currently structured, and we are looking for conditions offered by one side or the other for indications of the likely direction.”

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