Thu 02/14/2019 11:59 AM
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Takeaways
 
  • The DOJ will not give much weight to T-Mobile’s pledge to freeze prices for three years, according to a former DOJ official and industry specialists.
  • T-Mobile’s pledge could be a sign that the merging parties are “feeling some heat and need to do something,” the former DOJ official said.
  • Doug Brake, a telecom policy analyst at the Information Technology and Innovation Foundation said the price freeze is “less about the economics of the transaction” and is “more of a political signal.” The announcement of the freeze came about a week before the House Subcommittee on Communications and Technology held a hearing on the transaction.

T-Mobile’s promise to freeze prices if regulators approve its deal with Sprint will likely not hold much weight with the DOJ, according to a former DOJ official and industry specialists.

“I doubt it moves the dial a lot for the decision,” said the former DOJ official. “And it might be a signal that they are feeling some heat and need to do something.”

Earlier this month, T-Mobile CEO John Legere told the FCC that for a period of three years T-Mobile will offer the “same or better rate plans” as those currently offered by Sprint or T-Mobile.

According to the former DOJ official, a pledge to freeze prices is not what the antitrust agencies look for as a solution to problematic transactions. “If they think there is a real structural problem, they think that’s a Band-Aid,” the former DOJ official said. “It’s not a fix.”

Phillip Berenbroick, senior policy counsel for the organization Public Knowledge, made a similar assertion. Public Knowledge has expressed concerns about the Sprint/T-Mobile deal. Berenbroick told Reorg M&A that the problem with the commitment to freeze prices is that after three years have passed, there are not enough competitors in the industry to “discipline the marketplace going forward.”

Doug Brake, a telecom policy analyst at the Information Technology and Innovation Foundation, told Reorg M&A that the price freeze is “less about the economics of the transaction” and is “more of a political signal.” The foundation has expressed support for the merger.

Legere’s announcement of the price freeze came about a week before the House Subcommittee on Communications and Technology held a hearing on Feb. 13 regarding the merger. During the hearing, Legere testified that prices would decrease following T-Mobile’s transaction with Sprint. Berenbroick and Brake were also witnesses at the hearing, along with Legere and Sprint Executive Chairman Marcelo Claure.

Reorg M&A’s previous coverage of this transaction can be found HERE.

--Ryan Lynch and Alexandra Wilts
 
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