T-Mobile, Sprint say merger is Trump's kind of deal

- April 30, 2018

T-Mobile and Sprint are pitching their merger to the Trump administration as one that will give the president what he wants: a leg up on China and a U.S. jobs boost.

The $26.8 billion all-stock transaction, announced Sunday, would combine the nation’s third- and fourth-largest wireless carriers. That kind of consolidation has sparked resistance in the past from regulators fearful of the impact on prices and consumers. But the companies say they face a new competitive landscape now — and as they mobilize to sell their deal in Washington, they're framing it as a win for Trump.

Their argument: A combined T-Mobile and Sprint will help the U.S. accelerate development of next-generation 5G networks, amid fears that China is winning the race to build the technology. Both T-Mobile CEO John Legere, who would lead the new company, and Sprint CEO Marcelo Claure will carry that message to Washington for meetings this week, and the two companies' can tap formidable lobbying forces to press the case as well.

The stakes are particularly high for Legere, who has tangled with Trump on Twitter in the past, including a 2015 spat in which Trump called T-Mobile's service "terrible." But the CEO brushed off any concerns that the dust-up may affect the White House’s reception of the deal, saying he and Trump "both looked at that as two high-profile, competitive people that understand that kind of back and forth on Twitter.”

Meanwhile, Legere said in an interview, the substance of the merger should offer a lot to appeal to the president.

“The aspects of 5G and competitiveness of the United States and the lead that we’re losing to China and South Korea are probably high on his agenda as well, and give us a common platform to discuss this deal from,” he added.


The companies are also putting a strong jobs spin on their merger, attuned to the president's "America First" focus on U.S. manufacturing and domestic job growth. They're touting plans to invest about $40 billion over three years in their combined network and business — creating jobs through construction of new 5G cell towers, expansion of U.S. call centers and opening of new stores. During a call with reporters Sunday, Legere didn't rule out post-merger layoffs, but predicted that new hiring would outpace any job cuts.

The focus on jobs is a well-worn path for executives seeking inroads with Trump. In December 2016, shortly after the election, SoftBank CEO Masayoshi Son, whose company owns Sprint, pledged to invest $50 billion and create 50,000 new jobs in the United States. The concession delighted Trump, who took credit for the announcement, but it appeared to align with the company's previously disclosed business plans, raising questions about whether SoftBank was simply recycling old news in a Trump-friendly package.

Legere and Claure said they aim to hold meetings at the Federal Communications Commission on Tuesday and Wednesday. Legere said the two executives made “courtesy calls” to FCC Chairman Ajit Pai and the agency's four other commissioners Sunday. They also plan to do outreach on the Hill when Congress is back in session.

Both companies have a broad network of lobbyists on hand — including some with strong ties to the Trump administration — as they push for approval in Washington.

T-Mobile has ratcheted up its lobbying spending every year since at least 2012, shelling out a record $8.4 million last year. Its in-house lobbying team, which includes Capitol Hill and FCC alumni, is augmented by more than two dozen outside firms. They include Brownstein Hyatt Farber Schreck, the former employer of DOJ antitrust chief Makan Delrahim, as well as Turnberry Solutions, a lobby shop whose founders hail from President Donald Trump's election campaign.

Sprint spent a more modest sum, $2.3 million, on its federal lobbying efforts last year, but its roster of outside influence firms includes Ballard Partners, whose president, Brian Ballard, was a top campaign fundraiser for Trump.

The CEOs also had words of praise for the president’s leadership on the GOP tax cuts, which they say made the merger deal more attractive for the companies.

But the crux of their argument is centered on 5G. Legere and Claure highlighted a recent study commissioned by wireless trade group CTIA that found the U.S. is trailing other countries in the race to deploy the next-generation networks. (Claure is chairman of CTIA’s board of directors.)


The Trump administration is grappling with how to support expansion of 5G, which promises speeds up to 100 times faster than current networks. A proposal floated in the National Security Council earlier this year to create a nationalized 5G network was broadly panned by industry and the FCC as unworkable, but it revealed the depth of White House anxiety about the economic threat posed by China.

Claure and Legere are banking on 5G playing a critical role as regulators review the merger. The Obama administration resisted discussions about combining the two companies in 2014 because it would have eliminated one of the top four carriers. And the DOJ moved to block a merger between AT&T and T-Mobile in 2011 over similar concerns.

Before becoming the Trump DOJ’s antitrust chief, Delrahim lobbied against the AT&T-T-Mobile deal as a private lawyer on behalf of a coalition backed by DISH Network and others.

But the two CEOs say times and circumstances are different this time. They will make the case that the wireless market is broader than four national carriers, with cable giants like Comcast and Charter Communications increasingly moving into the sector.

“The world has changed,” Claure said. “There’s no such thing as four carriers, and as you move into 5G, you’re even going to see more competitors. So we feel that looking at the market from four to three is a mistake.”


Also hovering in the air is the Justice Department's decision, led by Delrahim, to block AT&T's $85 billion deal for Time Warner, a clash that is now playing out in court. Trump himself has expressed opposition to that acquisition, saying it would concentrate too much power in the hands of one company.

And consumer advocates are already directing criticism at the T-Mobile-Sprint announcement.

"Consumers will be the losers if T-Mobile and Sprint are allowed to merge," said Gigi Sohn, who served as an aide to former Democratic FCC Chairman Tom Wheeler. She called both companies "feisty competitors" to Verizon and AT&T, "introducing consumer friendly pricing and data plans that have pushed the big two to lower their prices and expand their data offerings."

Legere, though, says he's confident he's marshaled the right data points to secure approval in Washington.

“If this transaction is looked at from an open-minded standpoint on the merits of what it will bring, I think it has a tremendous opportunity to get approved in a rapid fashion,” he said.

Steven Overly contributed to this report.


 

Start typing and press Enter to search