Antitrust staff in the U.S. Department of Justice are unlikely to endorse a potential merger between T-Mobile and Sprint, according to a new report.
Reuters, citing three sources familiar with the thinking of DOJ staff, reported that regulators would probably seek to maintain the presence of four large wireless carriers in the U.S. market and oppose the combination of the third- and fourth-largest providers.
Recent reports suggested that T-Mobile and Sprint reached a deal on merger terms and are expected to announce an agreement later this month.
Although only a fraction of mergers are blocked by antitrust regulators — and the Federal Communications Commission recently deemed the U.S. mobile market “competitive” — critics warned that a combination of Sprint and T-Mobile could stifle competition and curb the significant price reductions seen in recent months.
DOJ staff reportedly hope T-Mobile will continue its aggressive efforts to lure customers away from market leaders Verizon and AT&T. Sprint and T-Mobile would also account for the majority of the prepaid cellular market if combined, which could affect prices for customers that tend to be lower income or have poor credit.
The fate of any announced deal, however, remains firmly up in the air. Although DOJ staff are likely to oppose it, the Trump administration is viewed as friendly to business and analysts surveyed by Reuters were split on whether a merger would ultimately be blocked.
Analysts from MoffettNathanson maintained their previous estimate that the odds of approval were “50/50,” but suggested in a new report that Sprint’s stock value remained inflated by the possibility of a merger.
“We conclude that, while the risks in T-Mobile appear reasonably balanced, the risks in Sprint appear decidedly asymmetrical,” analysts wrote. “Sprint shares have been falling … but it appears to us that they still have quite a bit further to fall.”