Sprint, T-Mobile’s Plan to Sell Assets to Dish Prompts Skepticism

Antitrust regulators’ plans to approve T-Mobile U.S. Inc.'s $26.5 billion acquisition of Sprint Corp. by establishing Dish Network Corp. as a wireless competitor are brewing skepticism.

The government’s record on creating new viable market entrants as it conditionally signs off on competitors’ mergers is spotty, antitrust attorneys say. Satellite TV provider Dish’s past stumbles in its attempts to enter the wireless carrier business also have industry watchers questioning whether the regulators can successfully pull off the plan.

“The government’s odds of failing are greater where there is more complication,” said Blair Levin, a former chief of staff at the Federal Communications Commission in both the Obama and Clinton administrations. “It’s an interesting proposal, but it will be hard to implement.”

The Justice Department is close to approving the telecom deal once Sprint, T-Mobile, and the government finalize a plan to sell assets, including rights to some airwaves, to Dish, according to Bloomberg News.

Makan Delrahim, chief of the DOJ’s antitrust division, wants to set up Dish as a new wireless competitor to replace the competition lost once T-Mobile and Sprint—the nation’s third and fourth largest carriers, respectively—merge. T-Mobile’s spectrum assets would allow Dish, which is already sitting on about $20 billion worth of wireless airwaves, to establish itself as a mobile network operator, regulators believe.

Sprint, Dish, and T-Mobile didn’t immediately respond to requests for comment.

DOJ sign off on the deal is expected any day.

Spotty Past

The antitrust agencies’ record in alleviating merger concerns by ordering moves to create new, viable competitors—through asset sales or subsidiary spinoffs—is “mixed,” Jeff Blattner, a former deputy assistant attorney general in the DOJ’s antitrust division, said.

In some instances, past merger divestitures led to the acquiring company going bankrupt. In other cases, the original owner had to reacquire assets it sold to obtain the government’s approval.

In 2012, the Federal Trade Commission forced Hertz Global Holdings Inc. to spin-off its Advantage Rent a Car unit as a condition to close Hertz’s $2.3 billion acquisition of Dollar Thirty. Months later, Advantage filed for bankruptcy, stating it couldn’t thrive as a competitor.

A similar scenario played out in 2015 when the FTC approved Albertsons Companies LLC’s $9.2 billion deal with Safeway Inc. on the condition that Albertson sell 168 of its supermarkets. Haggen Holdings LLC, which acquired the stores, went bankrupt later in the year. In 2016, Albertsons acquired Haggen’s assets as part of a bankruptcy settlement.

The DOJ too has struggled with fixes it ordered to approve mergers. In 2009, the DOJ fined AT&T Inc. $2 million after the company failed to comply with a 2008 merger settlement to acquire Dobson Communications Corp.

Energy provider Exelon Corp. faced a $400,000 fine in 2012 when it disobeyed a DOJ divestment order to sell some assets in its $7.9 billion merger with Constellation Energy Group.

“Antitrust enforcers tend to be excessively optimistic of the likelihood that competition lost due to a merger can be replaced due to divestitures,” Blattner said.

“Real skepticism seems warranted” with the Sprint, T-Mobile deal, he added.

Enough Experience?

Dish may acquire at least $6 billion in assets, including T-Mobile’s spectrum and Sprint’s prepaid brand Boost Mobile, Bloomberg News reported. Once the merger is approved and closed, T-Mobile would allow Dish to use its network for several years to sell prepaid plans until Dish builds its own network with the spectrum it owns, according to Bloomberg News.

In evaluating divestiture orders, the question of whether the government has found the right buyer with enough experience to handle the assets surfaces, Andrew Ewalt, an antitrust partner at Freshfields Bruckhaus Deringer LLP in Washington, said.

“This is the kind of thing that is always an issue in cases where the parties have proposed a divestiture,” Ewalt, a former DOJ antitrust attorney, said.

Dish, controlled by chairman Charlie Ergen, tried to buy Sprint in 2013 but lost its bid to Japan’s Softbank Group Corp.

The fact that Dish is sitting on $20 billion worth of spectrum assets also “is likely to be an issue,” Blattner said.

Dish’s competitiveness, even with its own wireless plans, will be questioned, Levin said.

“The wireless industry today is about churning market share than attracting any new customers,” he said. “It’s difficult entering the market when pretty much all the customers are taken.”