DOJ Staffers: The T-Mobile Sprint Merger Will Reduce Competition And Should Be Blocked

We've already noted how, despite some empty promises by Sprint and Japanese-owner Softbank, the company's (second) attempted merger with T-Mobile will be a notable job killer. How bad will the damage be? At least one analyst predicts the total number of jobs lost could be more than the total number of people Sprint currently employs (around 28,000). Other analysts estimate the deal could kill something closer to 20,000 jobs, and even the most optimistic tallies put the job damage at somewhere closer to 10,000 lost positions -- most of them either in retail (as duplicate stores are closed) or among redundant management positions.

The reduction in major wireless competitors from four to three will also have an obvious, detrimental impact on competition in the space, reducing price competition in the sector and potentially putting an end to the recent, welcome return of unlimited data plans. Just ask career staffers at the Justice Department, who this week leaked word that many of them would be advising agency bosses to block the deal unless their goal is less competition in the space:

"When Sprint and T-Mobile bring their expected merger plans to the U.S. Department of Justice for antitrust review, the career staff who do the bulk of the probe into whether the deal will hurt customers will likely recommend that it be stopped, three people familiar with their thinking told Reuters...The Justice Department's main concern is how the deal would affect competition in the U.S. mobile sector. Antitrust staff will want to let T-Mobile continue as it has done, aggressively wooing customers away from market leaders Verizon Communications and AT&T, the people said.

Of course whether DOJ and FCC leaders listen to this advice is another question entirely. Trump's "populist" rhetoric on the campaign trail suggested a tough antitrust President who'd block mega-mergers that harm the public interest and market health, but his decision to approve AT&T's mammoth Time Warner merger suggests those promises were relatively hollow. And as you may have noted Trump's FCC boss Ajit Pai is a rubber stamp for giant telecom operators; a commissioner that has yet to stand up to industry on any major subject of note during his five-year tenure.

As such, this is being seen as the first real chance for the administration to put its money where its mouth is, and the same Reuters report above notes that analysts are decidedly split on whether that will actually happen:

"An informal poll of seven antitrust experts contacted by Reuters found them split between predicting that the deal would be stopped and saying they did not know if it would be allowed. A tiny fraction of deals are blocked. As influential as the career staff is, the final decision will lie with Trump's antitrust enforcer at the Justice Department, Makan Delrahim, and the Federal Communications Commission."

There's an ongoing mantra in the telecom space that blind deregulation is some kind of panacea, and that by stripping away all government oversight (including antitrust enforcement) of the broken and uncompetitive sector, connectivity and competition will magically sprout from the sidewalks. But history and real-world data consistently undermines that theory. Regulators' decision to block AT&T's attempted acquisition of T-Mobile -- and Sprint's first attempted merger with T-Mobile -- caused in a notable spike in competition thanks to a resurgent T-Mobile, resulting in unlimited data plans, better international roaming rates, the end of punitive long-term contracts, and more.

Again, Sprint has any number of potential suitors or partners that could help the company better compete (Altice, Comcast, Charter, Dish) without reducing overall competition in the sector. Crushing T-Mobile's motivation to disrupt the market by eliminating a major competitor is a notably bad idea, no matter what the industry-funded sales pitches over the next few weeks will try to suggest.