China may help T-Mobile and Sprint win over D.C.
By Jennifer Saba and Gina Chon
(The opinions expressed are their own.)
NEW YORK/WASHINGTON, Feb 11 (Reuters Breakingviews) - The fate of the merger between T-Mobile US and Sprint may hinge on an international contest rather than domestic competition. The $26 billion deal is rooted in the promise of a 5G buildout. The union of the two cellphone companies will cut down U.S. consumers' options. But America's race with China to take the lead in the next generation of mobile technology could win over watchdogs.
T-Mobile US Chief Executive John Legere will testify in front of members of Congress on Wednesday as the boss of the No. 3 U.S. carrier seeks to gain approval to buy SoftBank-backed Sprint, the fourth-largest. When the deal was announced last spring, the companies emphasized that a tie-up would boost efforts to build 5G networks, which will serve as the backbone for lots of things to come including connected cars and new areas of defense.
The last time Sprint and T-Mobile US considered a merger in 2014, the talks collapsed because the Federal Communications Commission and the Justice Department had big concerns over the idea that four major telecom players would dwindle to three.
But priorities in Washington have shifted. There are now real worries that China is ahead of the game in 5G development. FCC Chairman Ajit Pai described the necessity of U.S. leadership in 5G as a "national imperative for economic growth and competitiveness." Accenture estimates that 5G will add $500 billion to U.S. GDP and create three million new jobs.
President Donald Trump has made the technology a top initiative. Last March, the president blocked microchip maker Broadcom's$117 billion hostile bid for Qualcomm in part because of fears it could weaken Qualcomm's research and development, thereby hurting 5G efforts.
The United States' alarm about Chinese telecom-equipment maker Huawei could help T-Mobile US and Sprint, too. U.S. prosecutors recently charged two Huawei affiliates with stealing trade secrets from T-Mobile US. Back in 2013, Sprint agreed to remove Huawei equipment to allay the government's national-security concerns regarding SoftBank's takeover of the carrier. Fast forward, and America's rivalry with the People's Republic may weigh more heavily than reduced domestic competition.
- T-Mobile US Chief Executive John Legere and Sprint Chairman Marcelo Claure have agreed to testify on Feb. 13 before members of the U.S. House of Representatives during a hearing on the two cellphone companies' proposed $26 billion merger.
- T-Mobile US told the Federal Communications Commission on Feb. 4 that it would not increase prices for three years if it gets approval to buy Sprint.
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