Sprint's chairman and CEO, Masayoshi Son and Dan Hesse, reportedly held talks with Department of Justice (DOJ) officials earlier this month to discuss the carrier buying its rival T-Mobile. The Wall Street Journal reports the DOJ warned Sprint that an acquisition could meet with "intense scrutiny" and regulatory difficulties. Although the WSJ's sources disagree on the level of resistance conveyed in the meeting, some say that the current four-carrier system is regarded as important to maintaining a competitive market in the US.
There's nothing particularly unusual about the meeting itself — such conversations are commonplace before an acquisition bid — but the DOJ doesn't usually give too strong an opinion on a deal until they've fully reviewed a case. Regardless of the strength of the DOJ's concern, it appears it's not going to dissuade Sprint chairman Masayoshi Son from pursuing a deal.
Masayoshi Son, who obtained a majority stake in Sprint last year, has been rumored to be planning to merge the company with T-Mobile for several months, with December reports suggesting a deal was getting closer. According to the WSJ, Sprint has the financing in place to launch a bid, and the two are currently working out terms such as a breakup fees, leadership structure, and what the newly merged company would be called. Given the complexity of the negotiations, they could take some time to resolve.
The companies would need to demonstrate that a deal would increase competition
T-Mobile was very nearly bought by AT&T back in 2011, but the deal fell apart, mainly due to intense scrutiny from antitrust officials at the DOJ and FCC. Although Sprint and T-Mobile are third and forth place behind market leaders AT&T and Verizon, the companies would need to demonstrate that a deal would increase competition.
While a newly formed Sprint-T-Mobile would undoubtably be better placed to compete with Verizon and AT&T in raw numbers, it's not quite as simple, as we explained last month. After a torrid few years, T-Mobile has begun to turn things around recently, and Sprint has Masayoshi Son's financial clout to help it on a similar path to recovery. With that in mind, it could be argued that both companies are already in a good place to be competitive with AT&T and Verizon moving forward.