The DOJ's Plan To 'Fix' The T-Mobile Merger Is Already A Hot Mess

from the do-not-pass-go,-do-not-collect-$200 dept

Earlier this year the Bill Barr DOJ absolutely tripped over itself to approve T-Mobile's controversial $26 billion merger with Sprint, despite a mountain of evidence that the deal would erode competition, raise prices, lower wages, and result in thousands of layoffs. It was so grotesquely corrupt, the approval process even involved "antitrust" DOJ boss Makan Delrahim literally helping guide T-Mobile through the proposal process using his personal phone and text message accounts.

The DOJ's "fix" for the problematic deal also involved shoveling some spectrum from T-Mobile over to Dish Network, which (it was promised) would then spend the next seven years building a replacement fourth wireless carrier to help offset the competition lost by gobbling up Sprint.

As we noted at the time, the proposal was never likely to work. One, Dish has a long, long history of empty promises when it comes to wireless (just ask T-Mobile), hoovering up valuable spectrum, making ample promises, then failing to deliver. The proposal also requires an FCC and DOJ that are proud of being "hands off" (read: fecklessly obedient to industry giants), suddenly being forced to closely shepherd the deal to fruition. This despite the fact that FCC BFFs AT&T, Verizon, and T-Mobile are all incentivized to make sure this new fourth competitor never succeeds.

Not too surprisingly, none of this is going particularly well. T-Mobile has already started closing prepaid outlets and firing employees, something the US government and T-Mobile repeatedly promised wouldn't happen. The pandemic is also making it harder for Dish to secure financing and begin the deployment of its promised 5G network. Even some of the basic aspects of the deal (like offloading T-Mobile prepaid brand Boost Mobile to Dish) have been mysteriously stuck in neutral:

As part of the government's remedy in the T-Mobile/Sprint merger, Dish Network is supposed to buy Boost Mobile for $1.4 billion, but so far, that deal hasn’t closed. Analysts are asking: What’s up? And as usual when it comes to Dish and wireless, it’s complicated.

“We are unaware of why Dish has not closed the Boost deal,” wrote LightShed Partners analysts Walter Piecyk and Joe Galone in a blog post today. “It should have been done by June 1st. Something is up."

Dish and T-Mobile have been unable to agree to terms on a 600 MHz spectrum lease as required by the DOJ judgement on T-Mobile’s acquisition of Sprint, and Dish hasn't yet been able to explain why the Boost transition hasn't happened. Again, keep in mind, T-Mobile is incentivized for Dish not to succeed, since they (like AT&T and Verizon) don't actually want a viable fourth competitor to emerge from this process. And, not surprisingly, analysts state that Dish and T-Mobile have been more combative than cooperative:

"Among the questions: How will disputes between Dish and T-Mobile be resolved? “It is clear from recent filings that the momentary kumbaya relationship between DISH and TMUS during the final phase of the merger review has left and there has been a return to the more combative relationship that marked the first phase of the merger review,” wrote New Street policy analyst Blair Levin."

Dish CEO Charlie Ergen is notoriously difficult to get along with. Now, as we've predicted, you've got the "hands off" DOJ and FCC tasked with nannying this deal through to completion, without any indication they have the motivation or competence to do so.

My assumption has always been that this entire merger "solution" has all been little more than elaborate theater.

Dish may simply want to hoard spectrum and then offload it down the road at a premium, dragging feckless regulators the entire way. T-Mobile, AT&T, and Verizon lobbyists and policymakers are all incentivized to make sure this added competition never takes root. And the DOJ and FCC, little more than glorified rubber stamps to industry at this point, are keen to create the illusion of strong ethical leadership, when in reality they rubber stamped a shitty merger (again, ignoring all objective data). And the US press, so eager to stenograph hype pre-merger, will likely be far less involved in documenting the real cost of merger mania as this paper mache proposal slowly falls apart, employees are laid off, and US consumers inevitably face even higher prices for mobile data in the years to come.

Filed Under: 5g, antitrust, charlie ergen, competition, doj, fcc, spectrum, wireless
Companies: boost mobile, dish, sprint, t-mobile

Dish's Wireless Network, A Cornerstone of the T-Mobile Merger, Is Already On Shaky Ground

from the empty-promises dept

If you recall, the biggest downside of the $26 billion Sprint T-Mobile merger was the fact that the deal would dramatically reduce overall competition in the U.S. wireless space. Data from around the globe clearly shows that the elimination of one of just four major competitors results in layoffs and higher prices due to less competition. It's not debatable. Given U.S. consumers already pay some of the highest prices for mobile data in the developed world, most objective experts recommended that the deal be blocked.

It wasn't. Instead, the Trump FCC rubber stamped the deal before even seeing impact studies. And the DOJ not only ignored the recommendations of its staff, but DOJ "antitrust" boss Makan Delrahim personally helped guide the deal's approval process via personal phone and email accounts. Both agencies, and the vocal chorus of telecom-linked industry allies, all behaved as if all of this was perfectly legitimate and not grotesquely corrupt.

At the heart of the DOJ's approval was a flimsy proposal that involved giving Dish Network some T-Mobile spectrum in the hopes that, over even years, they'd be able to build out a replacement fourth carrier. As we noted at the time there was very little chance this plan was ever going to work.

One, Dish (and CEO Charlie Ergen) have a long history of empty promises in wireless. He'd been accused (including by T-Mobile previously) of simply hoarding valuable spectrum and stringing along feckless, captured regulators for years with an eye on cashing out once the spectrum's value had appreciated. Two, AT&T, Verizon, and T-Mobile are all heavily incentivized to make sure this proposal never got off the ground. Three, the current FCC has yet to stand up to industry on a single issue of substance, would never engage in the kind of nannying required to usher Dish's plan from pipe dream to major network.

But with the pandemic, it's not even clear we're going to get to that part of the program. Reports now indicate that the pandemic and quarantine may have scuttled Dish's plans for financing and deployment, even if Ergen hadn't been bluffing. The complaints are largely coming from unsourced Wall Street insiders, but they're certainly right that funding the T-Mobile merger's deus ex machina just got notably more complicated:

"Ergen, the billionaire chairman of satellite-TV company Dish Network, needs to raise about $10 billion to build a 5G network that covers 70 percent of the US population by June 2023, fulfilling his part of a regulatory agreement that allowed Sprint to be acquired by T-Mobile on April 1.

But with the coronavirus wreaking havoc on the economy and drying up lending, Wall Street is predicting Ergen will fall behind — fast.

“I think whatever rosy projections Charlie had are now very questionable,” said a source who expected to be part Dish’s lending group. “There is no financing to build a telecom network."

Some analysts still seem to think Ergen could pull it off. But again, they're the same analysts who ignored red flags about Ergen's history, and all of the greasy corruption required to bring this merger to fruition in the first place:

"Two months of severe market uncertainty doesn’t really alter my view of a company to execute on a three-year plan,” Lightshed Partners Analyst Walt Piecyk told The Post, saying it is too soon to question if Ergen will meet the deadline.

But even just a few months of delay could put Dish in a worse spot financially as it‘s already the clear laggard among the four wireless networks, making for a riskier loan profile, sources said."

COVID-19 certainly does make financing and building a major wireless network difficult. But if Ergen was bluffing all along, the crisis will provide wonderful cover for Ergen to back out of a deal. That said, even if the network somehow does get built and become a major wireless replacement for Sprint, analysis suggests the end network would result in around 100 million fewer people in range of service than if we'd left Sprint intact. And that's in an ideal, non-pandemic world.

Most objective experts knew this merger was a turd, and the Dish effort was doomed to failure with the slightest disruption likely throwing a wrench in the works. But we rubber stamped the deal anyway. And by nearly every metric, history will remember the entire saga as little more than greedy imbecile theater while consumers and employees share the brunt of the inevitable fallout.

Filed Under: charlie ergen, competition, covid-19, mergers, wireless
Companies: dish, sprint, t-mobile