Cfius: Is the deal in the national interest of the United States?
In a regulatory filing on Monday, the companies acknowledged that they would need approval from the Committee on Foreign Investment in the United States, or Cfius. It is an intra-agency panel run from the Treasury Department that reviews mergers and can block them on national security grounds.
The reason for two American carriers to need approval? T-Mobile, which is acquiring Sprint, is controlled by Deutsche Telekom of Germany. Sprint is mostly owned by SoftBank of Japan.
Deutsche Telekom and SoftBank had to undergo reviews by Cfius when they bought control of their respective American wireless providers years ago, which suggests that any transfer of assets between the two now would pass muster.
But the Trump administration has recently taken a harder stance on foreign-owned acquisitions. It pre-emptively blocked Broadcom’s hostile bid for the chip maker Qualcomm. While Broadcom is based in Singapore, and had announced that it would relocate to the United States, the logic was that any change at Qualcomm could hamper its ability to help build out the next-generation wireless network, known as 5G, in the United States. The administration has also said it might consider nationalizing the 5G network, underscoring the sensitivity of the technology that underlies a merger between Sprint and T-Mobile.
Complicating matters are the business dealings of Sprint’s owner, SoftBank. It has ties to Huawei and ZTE, two Chinese tech companies whose connections to Beijing have been a matter of controversy.
But Sprint and T-Mobile are likely to point out that each has already passed a Cfius review in the past, and are willing to make concessions to win over the panel now.
F.C.C.: What’s in the public interest?
The Federal Communications Commission has scrutinized a possible T-Mobile-Sprint merger before.
In 2014, SoftBank’s founder, Masayoshi Son, met with the chairman of the F.C.C. at the time, Tom Wheeler, and the Justice Department’s antitrust chief at the time, Bill Baer. Mr. Son’s goal: to convince the regulators that AT&T and Verizon were an oligopoly that had a stranglehold on the United States wireless market. The best way to combat that, Mr. Son argued, was by letting Sprint combine with T-Mobile.
Mr. Wheeler and Mr. Baer rejected the argument, concluding that effectively reducing the wireless market to three major carriers from four would not be good for consumers. “The merger made no sense before, and it makes no sense today,” the two wrote in an op-ed on CNBC.com last year, as T-Mobile and Sprint resumed merger talks.
Sprint and T-Mobile are now betting that the new F.C.C. chairman, Ajit Pai, feels differently.
A Trump appointee, Mr. Pai has said that he would employ “humility” in determining which mergers should be allowed to go through. Last year, he pushed the F.C.C. to relax rules limiting how many television stations a broadcaster could own. Weeks later, the Sinclair Broadcast Group unveiled a deal to buy Tribune, a transaction that, if completed, would make the company the most powerful television station owner in the country. (The F.C.C.’s internal watchdog has begun an inquiry into that deregulatory push and whether it had been timed to help Sinclair.)
One question is how the F.C.C. will regard Sprint and T-Mobile’s argument that they need to fend off new players in the market. The carriers have pointed out that Comcast has begun bundling wireless service with cable television offerings, essentially by reselling access to Verizon’s network. Charter Communications is expected to unveil a similar service as well.
Craig Moffett, an analyst at the research firm MoffettNathanson, said that the commission has not traditionally considered offerings from cable companies when it comes to analyzing concentration in the wireless market. Whether it will now is unclear.
Justice Department: Will people pay higher prices?
The biggest regulatory wild cards may be the Justice Department and its current antitrust chief, Makan Delrahim. Late last year, the Trump appointee sued to block AT&T’s $85.4 billion takeover of Time Warner, arguing that the combination would lead to higher prices for content from HBO and Turner Broadcasting channels.
The move was notable because AT&T’s deal involved buying a content company, not another telecommunications rival.
T-Mobile and Sprint’s deal would unite two direct competitors, a type of deal that regulators have traditionally been harder on.
Mr. Delrahim has also opened an investigation into whether AT&T, Verizon and potentially other carriers have colluded to hamstring an effort to help consumers switch wireless service providers more easily.
And it was the Justice Department that first moved to block AT&T’s 2011 bid for T-Mobile. In its lawsuit, the department argued that shrinking from four carriers to three “would remove a significant competitive force from the market.” That attitude prevailed again in 2014 when Mr. Baer pushed back against a union of T-Mobile and Sprint.
Many of the department’s antitrust staff members today are holdovers from 2014, suggesting they may take similar stances now as they did then.
Though corporate America assumed that a Trump presidency would be more lenient toward deal-making, it has maintained an aggressiveness in regulating mergers, according to Norman Armstrong Jr., the co-head of the antitrust practice at the law firm King & Spalding.
“Overall I haven’t seen much change from the last administration to this one,” he said.
Cecilia Kang contributed reporting.