T-Mobile/Sprint merger reportedly hurdles security concerns, but opposition continues

Washington DC
Some Washington officials may have signed off on the merger of Sprint and T-Mobile. (Pixabay)

Officials at the Committee on Foreign Investment in the United States (CFIUS) may sign off on the proposed merger between Sprint and T-Mobile as early as this week, according to a new report. However, opponents of the transaction continue to work against it—the latest development on that front is the release of a new study arguing that, if the merger is approved, the average weekly earnings for U.S. retail wireless workers could decline by as much as 3% in some markets.

The various developments in recent days surrounding the proposed merger of T-Mobile and Sprint highlight not only the financial and economic positions of the nation’s third and fourth largest wireless network operators but also concerns over the country’s overall macroeconomic balance—as well as global geopolitical issues arising from an ongoing trade battle between the United States and China.

Indeed, it’s that ongoing trade battle that appears to be hovering over some of the most dramatic developments in the ongoing Sprint/T-Mobile merger process. According to a report from Reuters, the U.S. government’s CFIUS will sign off on the proposed merger after having obtained agreements from Japan’s SoftBank (Sprint’s parent company) and Germany’s Deutsche Telekom (T-Mobile’s parent company) that they will not use equipment from Chinese network equipment provider Huawei. CFIUS is a relatively secretive government agency headed by Treasury Secretary Steven Mnuchin that in part reviews international business transactions for national security issues.

Already, Japanese media have reported that SoftBank plans to replace its 4G network equipment from Huawei with hardware from Nokia and Ericsson; and separately Deutsche Telekom said late last week that it is reviewing its vendor plans in Germany and other European markets due to the debate on the security of Chinese network gear.

The apparent ouster of Huawei from SoftBank and DT’s businesses stems in part from the U.S. government’s vocal concerns about Huawei. For almost a decade, U.S. national security experts have argued the company’s products could be used as a backdoor into the nation’s telecommunications backbone by Chinese spies. And those concerns recently came to the fore following the arrest of Huawei’s CFO—the daughter of the company’s founder—in Canada due to requests from U.S. officials, who are looking to extradite Meng Wanzhou to the United States as part of an investigation into Huawei’s alleged use of the global banking system to evade U.S. sanctions against Iran. Meng was recently released on a $7.5 million bail.

For its part, Huawei continues to argue that its products pose no security threats. And, interestingly, the company earlier this year changed its U.S. strategy on the topic by shifting from a lobbying effort in Washington, D.C., to a legal effort there. According to The Wall Street Journal, Huawei recently hired a group of American lawyers to take its case to the U.S. court system.

If CFIUS does indeed acquiesce to the merger of Sprint and T-Mobile, the move would put the merger one step closer to consummation. The companies continue to hope to close their transaction in the first half of next year; the FCC and Department of Justice, along with a number of state officials, continue to review the deal.

And that’s where some of the main critics of the Sprint and T-Mobile merger are focusing. Opponents of the transaction—which include Public Knowledge, Dish Network, C Spire, the Communications Workers of America and others—are now pointing to new research that shows that the removal of a fourth competitor in the nationwide wireless marketplace will cut into retail workers’ wages.

“For the 50 most-affected labor markets, those percent changes correspond to a decline in annual earnings of between $520 and $3276 on average,” the researchers stated in a release.

That line of reasoning is one of several that opponents to the merger of Sprint and T-Mobile are leveraging. Executives from T-Mobile and Sprint, for their part, have argued the merger will not result in job cuts and will better position the United States to deploy 5G services ahead of countries including China.