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3 Reasons a Sprint-T-Mobile Deal Might Win Antitrust OK

June 11, 2014

The co-chair of Fenwick & West’s antitrust practice, Mark Ostrau, was quoted at length by Law360 on the prospects for U.S. regulatory approval of Sprint Corp.'s purported $32 billion plan to merge with T-Mobile.

"At the end of the day, they're still faced with the stark numbers of going from four to three [wireless telecommunications companies] in a market that's not going to see significant changes in entry or in new technological disruptions in the near future," said Ostrau. "So on balance it's still a long shot, but it's not crazy."

In contrast with AT&T’s bid to acquire T-Mobile—which was blocked by the Department of Justice’s antitrust division in 2011—the combination of Sprint and T-Mobile would not create the market-dominating entity that AT&T’s effort would have.  

"In this situation it's much more likely that either Sprint or T-Mobile's closest competitor is not each other but it's one of the other two,” Ostrau said. “So the elimination of competition between Sprint and T-Mobile isn't likely to allow them to raise prices as easily as AT&T could have with the elimination of T-Mobile."

Allowing an AT&T-T-Mobile merger in an industry with only three sizeable players could have enabled unilateral effects on the market, with consumers seeing higher prices due to AT&T’s actions alone. A combined Sprint-T-Mobile arguably wouldn’t pose the same anticompetitive threat, Ostrau said.

"Yes, it's very concentrated and you're removing a significant competitor, but the bigger competitor’s still there," Ostrau said. "That's really the strongest argument for them [because] there's some court precedent for saying it would be hard to make a unilateral effects case here given the continued presence of AT&T and Verizon."

Sprint could even make a case to the DOJ that its merger would improve consumer wireless options and pricing by expanding the reach of T-Mobile’s scrappy competitive approach, according to Ostrau.

"It's probably another factor that makes this a little more palatable that there's some reasonable argument that that could be the case," Ostrau said. "If I'm Sprint, I say: 'Here's how we're different from AT&T. Yes there is more consolidation, but this isn't going to result in a unilateral effects problem, and we will preserve and perhaps even expand T-Mobile's maverick nature.'"

The Sprint-T-Mobile combination could also enable better service and greater competition through pooling of the companies’ financial resources.  

"Perhaps there's some economies in future investments that they can show either [company] was not going to make, that together they might make," Ostrau said.

The full article is available through the Law360 website (subscription required).