Justice Department staff are likely to try and block a potential T-Mobile-Sprint mega deal
FILE PHOTO: Smartphones with the logos of T-Mobile and Sprint are seen in this illustration Thomson Reuters
WASHINGTON (Reuters) - When Sprint and T-Mobile bring their expected merger plans to the U.S. Department of Justice for antitrust review, the career staff who do the bulk of the probe into whether the deal will hurt customers will likely recommend that it be stopped, three people familiar with their thinking told Reuters.
The deal between the U.S. third- and fourth-largest U.S. wireless carriers, likely to be announced later this month, is set to test how antitrust enforcers will approach big deals under the administration of President Donald Trump, who is seen as pro-business but also ran a populist campaign aimed at the worries of ordinary Americans.
The Justice Department's main concern is how the deal would affect competition in the U.S. mobile sector. Antitrust staff will want to let T-Mobile continue as it has done, aggressively wooing customers away from market leaders Verizon Communications Inc and AT&T Inc , the people said.
T-Mobile touts itself as the fastest-growing U.S. wireless company, and its annual report lists enticements to attract customers like paying termination fees for new customers who leave their old company.
If combined, T-Mobile U.S. Inc and Sprint Corp would have more than half the market for pre-paid plans, favored by people with little or poor credit, which will likely figure in competition considerations.
"Losing that head-to-head competition could drive up prices for those on a more limited income," said Gene Kimmelman, president of Public Knowledge, a consumer advocacy group.
Sprint and T-Mobile agreed on tentative terms on a plan to merge in late September, sources said.
But it is not clear the deal will be any more successful than three years ago, when Japan's SoftBank Group Corp , which controls Sprint, abandoned talks to acquire T-Mobile for Sprint in the face of opposition from U.S. antitrust regulators.
An informal poll of seven antitrust experts contacted by Reuters found them split between predicting that the deal would be stopped and saying they did not know if it would be allowed. A tiny fraction of deals are blocked.
As influential as the career staff is, the final decision will lie with Trump's antitrust enforcer at the Justice Department, Makan Delrahim, and the Federal Communications Commission.
Deutsche Bank analysts said in a research note this week they were "very bearish on the prospects for deal approval," citing not only regulatory risk, but also political opposition from Democrats to deals that could threaten U.S. consumers.
If the agencies decide to try to stop the merger, they have ammunition.
The U.S. wireless market is dominated by Verizon with about 146 million wireless customers and AT&T with nearly 135 million. T-Mobile is third with 71.5 million and Sprint is No. 4 with 58.5 million, according to Fierce Wireless, which collects and analyzes wireless market data. Together, the four have 98.8 percent of the U.S. wireless market.
T-Mobile dominates the prepaid market. Combining with Sprint would give it 56 percent of the market to provide wireless to people who tend to be poorer or have no or bad credit, according to John Fletcher, an analyst with S&P Global.
One point in the deal's favor is that the mobile market is competitive. Between August 2016 and August 2017, wireless telephone services prices fell a stunning 13.2 percent, according to the U.S. Bureau of Labor Statistics.
"Chances are better now, meaningfully better," that the deal will win approval, said Daniel Bitton, an antitrust attorney with Axinn, Veltrop and Harkrider.
(Reporting by Diane Bartz in Washington; Editing by Bill Rigby)
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