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‘Game of Phones’: Selling a cellular merger

A woman using a cell phone walks past T-Mobile and Sprint stores in New York. In April, the two telecom companies announced a $26.5 billion combination. On Wednesday, the Senate Judiciary Committee will hold a hearing examining the proposed merger of the two companies — the third- and fourth-largest wireless carriers in America with a combined 128 million subscribers.
A woman using a cell phone walks past T-Mobile and Sprint stores in New York. In April, the two telecom companies announced a $26.5 billion combination. On Wednesday, the Senate Judiciary Committee will hold a hearing examining the proposed merger of the two companies — the third- and fourth-largest wireless carriers in America with a combined 128 million subscribers. AP file | April 27, 2010

Someone in the Senate Judiciary Committee has an ironic sense of humor.

The group’s antitrust subcommittee will hold a hearing in the week ahead entitled “Game of Phones.” For those without an HBO subscription, it’s a play on the pay TV channel hit “Game of Thrones” — a medieval fantasy of warring families based on the novels by George R.R. Martin.

Wednesday’s Senate hearing won’t feature ice zombies or fire-breathing dragons, but for telecommunication investors and customers, it represents the latest battle in a war of consolidation.

The hearing will examine the proposed merger between T-Mobile and Sprint — the third- and fourth-largest wireless carriers in America with a combined 128 million subscribers.

A year and a half ago, this same subcommittee considered the AT&T-Time Warner merger. But after a court fight with the Trump Administration, that $85 billion deal became official earlier this month. (HBO, the producer of “Game of Thrones,” was a Time Warner property and is now owned by AT&T, which is the second largest wireless carrier in the nation. Hence, the wry nod in Wednesday’s regulatory hearing.)

Big corporate mergers facing this kind of scrutiny rest on how regulators define the relevant market. The Justice Department’s arguments that a merged AT&T and Time Warner would lead to higher prices and less choice for video consumers failed to convince a federal judge. Instead, the companies successfully argued the traditional cable TV model was under siege thanks to the likes of Netflix, Amazon and Google’s YouTube.

Expect similar claims from Sprint and T-Mobile. Their view of the mobile services world includes traditional cable companies Comcast and Charter. But Charter hasn’t launched its wireless business yet, and both of them resell services from Verizon, the largest cellular services provider in the U.S. Sprint and T-Mobile also have dangled a faster build out of a nationwide 5G wireless network if they are allowed to combine resources.

Just seven years ago, the Department of Justice successfully blocked AT&T’s buyout of T-Mobile. T-Mobile didn’t shrink away. Instead it innovated by doing away with the traditional two-year customer contracts, and offering unlimited text and calling plans. By 2013, T-Mobile subscriber growth was growing. It has more than doubled since.

Sprint and T-Mobile shares have dropped since their merger was announced – a sign the market is skeptical a deal will happen.

Consumers and shareholders will get a better sense of how this game will be played during Wednesday’s hearing.

Tom Hudson hosts “The Sunshine Economy” on WLRN-FM; @HudsonsView.

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