FCC Chairman 'Skeptical' of Sprint's Rumored T-Mobile Takeover
Sprint's rumored takeover of competitor T-Mobile (NYSE: TMUS) may be meeting with some regulatory issues, amid word that new Federal Communications Commission Chairman Tom Wheeler is against the acquisition.
In a meeting with Sprint (NYSE: S) Chairman Masayoshi Son on Monday, Wheeler expressed “skepticism” with the acquisition. Son, the CEO of SoftBank Corp, the company that acquired Sprint last year, and Sprint CEO Dan Hesse met with the FCC to try and ease the governments concerns with the takeover. Reuters first reported the FCC Chairman's hesitation with Sprint's attempts at acquiring T-Mobile.
Wheeler and antitrust chief William Baer had similar comments to the potential takeover bid. Baer said any mergers between two of the four main wireless phone companies would be met with hesitation by regulators.
Regulators from the FCC and the Justice Department are worried a potential merger between the third and fourth biggest wireless companies would hurt competition in the industry and negatively impact customers. Similar problems occurred back in 2011, when AT&T announced a $39 billion deal to acquire T-Mobile, but was shut down by both the Justice Department and FCC officials.
However, Sprint and its parent company SoftBank Corp (OTC: SFTBY) are still trying to convince the FCC to hear them out. Sprint's reasoning is that current market conditions aren't the best for U.S. consumers. The two biggest wireless phone companies, Verizon and AT&T, are so dominant in the industry across the United States that any long-term competition from anyone, including Sprint and T-Mobile, will be extremely difficult.
Essentially, while there are four big wireless phone companies right now, AT&T and Verizon's dominance will eventually overshadow the other two and Sprint's takeover of T-Mobile is a preemptive move to prevent that.
According to Reuters, who spoke to an individual familiar with the situation, Sprint is telling U.S. regulators the idea of “more U.S. mobile industry consolidation” shouldn't be rejected without being heard fairly.
Sprint has yet to actually announce a takeover of T-Mobile, but the consensus is that Sprint and SoftBank Corp are strongly thinking about one.
However, due to all the negative comments and rumors from regulators, in both the Justice Department and the FCC, it seems that a potential Sprint-T-Mobile merger would be quite difficult for both companies.
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