Merger/Acquisition: T-Mobile and Sprint

Background

On July 13, 2018,  T-Mobile and Sprint filed two joint Applications with the CPUC requesting approval of the proposed merger of T-Mobile and Sprint. One application is for the transfer of control of Sprint's wireline operations to T-Mobile and the second application is for the transfer of control of Sprint's wireless operations to T-Mobile.

 

On August 16, 2018, the Public Advocates Office filed with the CPUC a Protest recommending for the CPUC to perform a rigorous review of the effects of the proposed merger on California consumers including the impact to mobile wireless service (including broadband service), competition, innovation, pricing, service quality, public safety, customer account migration, net neutrality, privacy, and arbitration clauses. The Public Advocates Office recommended the Applications be consolidated since both are part of the overall proposed merger of T-Mobile and Sprint.

Scope of the Proceeding

On October 4, 2018, the CPUC issued an amended Scoping Memo establishing the schedule for the proceeding, consolidating both Applications, and stating that "the fundamental issue presented by these applications is whether the proposed merger of two of the four largest national wireless service providers is in the public interest of the residents of California." The CPUC identifies several factors that will be considered in making a public interest determination.

The Public Advocates Office Analysis of the Proposed Merger

On January 7, 2019, the Public Advocates Office issued its analysis of the proposed merger via Testimony. After completing its detailed review, the Public Advocates Office recommends that the CPUC deny the proposed merger of T-Mobile and Sprint because it is not in the public interest. The proposed merger lacks specific, measurable, and verifiable California benefits and would cause irreparable damage to competition in the wireless market and the low-income consumer market. The proposed merger would increase market concentration in most of the 58 counties in California that far exceed merger guidelines thresholds. As it relates to the pre-paid market, the proposed merger would result in a New T-Mobile making up nearly 60 percent of the wireless prepaid market that predominantly services low-income consumers, placing excessive market power under the control of a single company. The loss of a competitive player in these markets would create significant risk of coordinated conduct and higher pricing for consumers.

 

Lastly, a merger between T-Mobile and Sprint is not necessary to facilitate the deployment of an extensive 5G network. T-Mobile and Sprint as standalone companies have described their plans for 5G deployment and availability of 5G does not appear to be dependent on the proposed merger. Further details on the proposed merger impact on competition, innovation, pricing, service quality, public safety, customer account migration, consumer privacy, and arbitration clauses can be found below:

 

Public Advocates Office Testimony

Public Advocates Office's January 7, 2019 Testimony with full details of the Office's analysis.