By Canadian Press

Democrats question pledges in $26.5B T-Mobile-Sprint deal

Feb 13, 2019 | 5:35 PM

WASHINGTON — Democratic lawmakers challenged top executives of T-Mobile and Sprint on Wednesday over their pledge not to raise prices for wireless services or hurt competition if their $26.5 billion merger goes through.

At a hearing by a House committee, the two executives defended the deal, which would combine the nation’s third- and fourth-largest wireless companies and create a behemoth about the size of industry giants Verizon and AT&T.

Committee members from both parties fretted about the potential impact of a T-Mobile-Sprint merger on rural customers and carriers in rural areas that strike deals with major wireless companies. Many of the lawmakers on the Energy and Commerce subcommittee represent rural areas and small towns, and they voiced concern over jobs that could be lost in the merger in the companies’ call centres and other facilities.

T-Mobile has committed to federal regulators, who must approve the deal, not to raise prices for three years following the merger.

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But Rep. Frank Pallone, D-N.J., chairman of the full Energy and Commerce Committee, said he isn’t sure that Trump administration regulators would be willing to hold T-Mobile to that promise.

“How can we be sure that consumers who can least afford to pay more are not harmed by the merger?” Pallone asked.

Congress doesn’t have authority to rule on the merger, but lawmakers can ask pointed questions and raise concerns to regulators who are reviewing it. Now that Democrats control the House of Representatives and the Energy and Commerce Committee, they have convened the panel’s first merger-review hearing in eight years.

T-Mobile US CEO John Legere and Marcelo Claure, Sprint Corp.’s executive chairman, defended the merger and said American consumers would get more and pay less. Legere said T-Mobile’s analysis shows that consumers would save $7 billion to $13 billion a year by 2024.

“We can take competition to new levels,” he testified. “We will offer a much faster, broader and deeper network, and new services at lower prices. This will force our rivals — AT&T, Verizon and the cable monopolies — to improve their services, increase their own capacity and lower prices even further.”

“Rural America will disproportionately benefit,” Legere assured the lawmakers.

Complicating the executives’ argument is the fact that urban consumers are paying 22 per cent less for cellphone service following AT&T’s failed bid to acquire T-Mobile in 2011, a combination rejected by federal regulators as anticompetitive. That data comes from the Bureau of Labor Statistics price index for wireless telephone service.

T-Mobile subsequently launched aggressive promotions and made consumer-friendly changes such as ditching two-year contracts and bringing back unlimited data plans, moves that its rivals soon copied. Merger opponents claim those benefits will disappear if T-Mobile and Sprint no longer competed against each other.

Unions worry about job losses.

“Let’s tell it like it us. This merger would kill American jobs,” insisted Chris Shelton, president of the labour union Communications Workers of America, who also testified to the panel.

The CWA’s analysis found that job cuts could number up to 30,000 mostly because T-Mobile would close thousands of overlapping stores.

Legere said the merger would deliver some 5,600 new jobs by 2021. They would include positions in five new “customer experience centres” around the country.

At least one Democrat, Rep. Anna Eshoo, a Democrat from California whose district includes Silicon Valley, said she supports the merger.

The deal faces reviews by the Justice Department and the Federal Communications Commission. U.S. wireless carriers had been unable to get a merger deal through under President Barack Obama. But after President Donald Trump’s election, a more business-friendly FCC deemed the wireless market “competitive” for the first time since 2009, a move that some experts believe could make it easier to win approval for a merger.

The companies also say the combination would allow them to better compete — not only with Verizon and AT&T, but also with Comcast and others as the wireless, broadband and video industries converge.

The combined company, to be called T-Mobile, would have some 127 million customers. Among wireless carriers, Sprint and T-Mobile have the largest numbers of low-income customers, who are frequent users of prepaid phone plans — another area of concern expressed by lawmakers.

Some analysts see T-Mobile’s offer to keep a lid on prices as a signal that the deal isn’t likely to be approved. Analysts at New Street Research say the Justice Department may not be buying T-Mobile’s argument that combining with Sprint will bring lower consumer prices. Moreover, the head of Justice’s antitrust division doesn’t like merger conditions requiring regulators to keep an eye on the combined company’s behaviour for years after.

T-Mobile and Sprint also say the deal would help accelerate their development of faster 5G wireless networks and ensure that the U.S. doesn’t cede leadership on the technology to China.

T-Mobile’s German parent Deutsche Telekom would own about 42 per cent of the new company, while Japan’s SoftBank, which controls Sprint, would own 27 per cent.

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Arbel reported from New York.

Marcy Gordon And Tali Arbel, The Associated Press