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

The companies have pledged not to raise prices for wireless services or hurt competition under the deal.

  • By MARCY GORDON and TALI ARBEL AP Business Writers
  • Wednesday, February 13, 2019 1:54pm
  • Business

By Marcy Gordon and Tali Arbel / Associated Press

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 centers 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.

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 percent 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 labor 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 centers” 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 behavior 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 percent of the new company, while Japan’s SoftBank, which controls Sprint, would own 27 percent.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Melrose and Vine Collective owner Kara Langus in her vintage collection room at her store on Friday, Jan. 5, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
New and vintage women’s boutique aims to dazzle in downtown Everett

Add some sparkle to your wardrobe: Melrose and Vine Collective opened inside a former bank building on Pacific Avenue.

Garry Clark, CEO of Economic Alliance Snohomish County. (Kevin Clark / Herald file)
CEO steps down at Economic Alliance Snohomish County

Garry Clark, who has led the nonprofit chamber of commerce for three years, is leaving to “seek new opportunities.”

Dan Bates / The Herald
When Seattle Genetics founder, Clay Siegall lost his father while in college, he switched from studying for an MD to studying for a PhD., and a goal to treat cancer patients.  His efforts are paying off in lives.
Ex-Seagen CEO to return to Bothell to lead newly relocated biotech firm

Clay Siegall, who resigned from Seagen over allegations of domestic abuse, is now CEO of cancer therapy developer Immunome.

Molbak’s Garden Cafe in Woodinville, Washington. Photographed in 2016. (Andrea Brown / The Herald)
‘Shocked and heartbroken’: Woodinville garden store Molbak’s to close

After 67 years, Molbak’s Home + Garden, a mainstay just across the county line, will cease operations early next year.

Good Cheer’s two thrift stores are great places to find Christmas decorations and other knick-knacks. (File photo by David Welton)
A guide to gift buying on Whidbey Island

Consider these unique gift idea suggestions from the South Whidbey Record and the Whidbey News-Times

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.