Antitrust officials deliver blow to Sprint/T-Mobile deal hopes
Investors’ hopes of a near-term merger between Sprint and T-Mobile US are fading following warnings from senior US antitrust officials that a deal between the third and fourth-largest US mobile operators could face strong government resistance.
Shares in both companies have fallen sharply in the past month. Sprint has fallen more than 23 per cent and T-Mobile US is down more than 9 per cent - bigger declines than at AT&T and Verizon Communications, the largest US wireless operators.
The share price decline at Sprint, which is majority owned by Japan’s SoftBank, has wiped out two-thirds of the gains it made in the last two months of 2013, when speculation that it could bid for T-Mobile US reached a crescendo.
But since then, US officials appear to have gone out of their way to dissuade the companies from formulating a deal with a series of thinly veiled warnings. Last week, William Baer, the Department of Justice’s top antitrust official, indicated that more consolidation among the big four US wireless operators would be unwelcome.
Mr Baer pushed home his point in a speech praising the Justice Department’s opposition to AT&T’s $37bn bid for T-Mobile, which AT&T abandoned in late 2011. He also lauded T-Mobile’s subsequent efforts to compete in the marketplace, which he said had “spearheaded increased competition” and benefited consumers.
“The business community, consumers, and antitrust enforcers are all better off if anti-competitive mergers die on the drawing board,” he said, without tying his remarks to a potential T-Mobile deal with Sprint.
His comments, and those by other antitrust officials in recent weeks, have been interpreted by analysts and investors as sending a clear signal to the two companies and to Softbank’s chief executive, Masayoshi Son, who bought more than 80 per cent of Sprint last year.
“If Sprint and T-Mobile try to merge and the DoJ opposes them, the companies will not be able to say they weren’t warned,” said Christopher King and David Kaut of Stifel Nicolaus, an investment bank. “DoJ comments this week bolster our belief that a potential Sprint/T-Mobile merger would likely face government resistance, and could well be aimed at dissuading the companies from even trying,” they said, adding that the Justice Department’s message had been getting “increasingly ominous” since last year about preferring a wireless market with four national carriers.
The share price declines – Softbank’s shares have fallen almost 18 per cent in the last month – suggests investors have also heard the message.