What to expect in 2019: Sprint and T-Mobile Merger

With Japanese telecom firm Softbank and Germany’s Deutsche Telekom as the primary shareholders of Sprint and T-Mobile, respectively, the Committee on Foreign Investment in the United States (CFIUS) had to review the merger.  About a month ago, CFIUS gave its approval, At the same time, Team Telecom (DOJ, Homeland Security, Department of Defense) filed with the FCC that it had reviewed the potential national security, law enforcement, and public safety issues and had no major objections to the merger.

Next up are the antitrust decisions by the DOJ and FCC expected to be completed over the next few months.  As a potential signal of how things might go, at least at the FCC, is the hiring by the agency of UT economist David Sibley to assist in the merger review.  In the early 2000s when he was the Deputy Assistant Attorney General for Economics at the DOJ, Sibley wrote about issues in antitrust review of merger cases, including the relationship between increase in market concentration and successful coordination among the remaining market participants.  In their paper, Selected Economic Analysis at the Antitrust Division: The Year in Review, the authors, Sibley and Heyer, suggested that other relevant variables such as asymmetric costs, product characteristics, and discount rates across firms may influence the [un]likelihood of coordination and should be factored into merger analysis.  Will the agency’s analysis show that T-Mobile is likely to continue to be an industry disruptor post a hypothetical merger with Sprint because of its differences in cost and market approach with the market leaders, or is it more likely it will “get in line” and begin to implicitly conform with its competitors? 

Sibley, David and Ken Heyer. (2003). Selected Economic Analysis at the Antitrust Division: The Year in Review. Review of Industrial Organization 23, 95-119.