Takeaways
- Policy and advocacy groups disagree over whether Sprint and T-Mobile’s 5G argument for their merger will benefit the companies in the DOJ’s review of the transaction.
- One aspect of the companies’ 5G argument likely being examined is the length of the timeframe for the claimed benefits to be seen by the companies’ 5G network in 2024. According to Phillip Berenbroick, senior policy counsel for Public Knowledge, this timeline is too far off for the DOJ to practically include in its current analysis of the merger. Public Knowledge is opposing the merger.
- Sprint and T-Mobile are rationalizing their merger by arguing that consumers will benefit from improved network quality that will result from the combination of their complementary spectrum assets. By buying Sprint, T-Mobile would be acquiring the company’s valuable mid-band spectrum, which is critical band for the development of 5G.
- Berenbroick said there will be plenty of mid-band spectrum that T-Mobile will be able to access in the marketplace without buying Sprint.
There is disagreement between policy and advocacy groups over whether Sprint and T-Mobile’s 5G argument for their merger will benefit the companies in the DOJ’s review of the deal.
Sprint and T-Mobile have argued that their merger is necessary for the rapid and widespread deployment of nationwide 5G networks, which would occur largely as a result of the combination of the companies’ complementary spectrum assets. In an SEC
filing earlier this year, T-Mobile wrote that by 2024, “the New T-Mobile network will have approximately double the total capacity and triple the total 5G capacity of T-Mobile and Sprint combined, with 5G speeds four to six times what they could achieve on their own.”
When analyzing the alleged benefits of a deal, the DOJ tends to focus primarily on those that are likely to occur within two years following a transaction. Phillip Berenbroick, senior policy counsel for Public Knowledge, said that if an alleged benefit is expected to occur two years following the merger, “it is said to be non-verifiable.” He added that the companies’ expected goal of the year 2024 for realizing the benefits of their 5G network is too long of a time frame for the DOJ to realistically incorporate into its analysis of their merger. Berenbroick has met with officials at the FCC to express concerns about the transaction.
Doug Brake, a telecom policy analyst at the Information Technology and Innovation Foundation, or ITIF, agreed that a lot of the benefits from 5G would “be coming further down the line.” However, the new T-Mobile’s deployment of equipment in the years immediately following their transaction “would be a huge benefit,” Brake told Reorg M&A. “I would expect that the DOJ would take that into account.” ITIF has expressed support for the merger.
Other arguments against Sprint and T-Mobile’s 5G claims include the assertion that both Sprint and T-Mobile have repeatedly told investors they were committed to building their own nationwide 5G networks as standalone companies.
Berenbroick, senior policy counsel for Public Knowledge also told Reorg M&A that the companies’ engineering models “assume that neither company makes spectrum acquisitions in the future.” By buying Sprint, T-Mobile would be
acquiring the company’s valuable mid-band spectrum, which is critical band for the development of 5G. Economists hired by T-Mobile to analyze the merger have
found that consumers will benefit from improved network quality and reduced marginal costs that arise from combining the Sprint and T-Mobile complementary spectrum assets.
Berenbroick said that the FCC in its 2018
Communications Marketplace Report laid out a plan to make more spectrum available for 5G. There will be plenty of mid-band spectrum that T-Mobile says it needs to do 5G that the company can access in the marketplace without buying Sprint, Berenbroick said.
However, a representative of a telecommunications company told Reorg M&A that the FCC still does not have a strong enough plan to immediately make enough mid-band spectrum available for companies to build out nationwide 5G networks.
In the marketplace report released in December, the FCC wrote that in October 2018, it “made modifications to its rules governing the Citizens Broadband Radio Service in the 3.5 GHz band to spur additional investment and broader deployment in the band, promote robust and efficient spectrum use, and help ensure the rapid deployment of advanced wireless technologies - including 5G - in the United States.” Additionally, in July 2018, the commission adopted a Notice of Proposed Rulemaking identifying new opportunities for flexible use in up to 500 megahertz of spectrum between 3.7 and 4.2 GHz.
Reorg M&A’s previous coverage of this transaction can be found
HERE.
--Alexandra Wilts and Matt Tracy