Monday, 20 November 2017

Sprint, T-Mo gearing up for regulatory battle

By Mary Lennighan, Total Telecom
Monday 16 October 17

U.S. telcos will not include proposed asset sales in merger agreement, sources say, but regulators will likely ask for spectrum divestments

Sprint and T-Mobile US appear to be gearing up to do battle with regulators once their much-talked-about merger is announced. The two U.S. telcos will present a merger agreement without immediate plans for asset sales, Reuters reported on Sunday, citing unnamed sources familiar with the situation…

Sprint and T-Mobile US appear to be gearing up to do battle with regulators once their much-talked-about merger is announced.

The two U.S. telcos will present a merger agreement without immediate plans for asset sales, Reuters reported on Sunday, citing unnamed sources familiar with the situation.

The companies are seeking to preserve as much of their combined spectrum holdings and cost synergies as possible before regulators step in to call for concessions on the deal, the newswire said. This suggests they are steeling themselves for "challenging negotiations" with competition and telecoms regulators, it said.

Its sources explained that Sprint and T-Mobile US are expecting regulators to demand asset sales, including the sale of some spectrum licences, and they are preparing a negotiating strategy to deal with such demands.

As yet, the telcos have not included a cap on the amount of divestments they would be willing to accept, but the final agreement could include one they said.

Reuters quoted UBS research analyst John Hodulik as predicting that the FCC will likely force the companies to cede some spectrum, since the deal would leave the merged entity with more than 300 MHz of frequencies, more than AT&T and Verizon hold.

The companies themselves, meanwhile, will focus on the potential benefits to consumers from their tie-up, including their ability to push forward on 5G technology and the investments it will require, its sources added.

Earlier this month Bloomberg reported that an announcement will come in either late October or early November, alongside one of the companies' quarterly results presentation.

In that report it noted that the final deal is unlikely to include a traditional break-up fee, thereby reducing the financial risk should regulators overturn the deal.

Reuters' sources had a similar view, but said there is still a chance the final deal will have a break-up fee.

They also added the usual caveat that it is still possible the talks between the telcos will not result in a deal.

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