Lawmakers Grill T-Mobile, Sprint Execs on Merger Plans

John Legere Marcelo Claure
Jose Luis Magana/AP/Shutterstock

WASHINGTON — Top executives from T-Mobile and Sprint told lawmakers that their merger would create a next-generation wireless network that would also be a serious rival to cable companies in offering in-home broadband service. But they faced some skepticism from lawmakers that their promises would be fulfilled.

T-Mobile US CEO John Legere and Sprint CEO Marcelo Claure testified before a House Energy and Commerce subcommittee on Wednesday, but they were also joined by several opponents of the $26.5 billion merger, who argued that it would threaten jobs and worker pay, and that consumers would end up spending more. The merger would reduce the number of major wireless providers from four to three.

Rep. Mike Doyle (D-Vt.), who chairs the subcommittee, said he’s “seen a lot of mergers in this industry and others, and it’s hard to think of one where consolidation didn’t result in people losing their jobs, prices going up, and innovation being stifled.”

Legere and Claure argued that it would do just the opposite, and that the consolidation would create a more robust rival to AT&T and Verizon, which are dominant, in the investment in 5G wireless service.

“It is true that most mergers do not create jobs. This merger is the opposite,” Claure told the committee.

Legere also said the combined company would be “freeing millions from the stranglehold of big cable,” as it will begin offering high-speed in-home internet service.

The merger has drawn the support of Rep. Anna Eshoo (D-Calif.), Rep. Billy Long (R-Mo.), Rep. Kurt Schrader (D-Ore.), and 10 other members of Congress, who are urging regulators to approve the deal. Eshoo said “both companies are missing a crucial ingredient to become heavyweight competitors in the market.” She called Sprint’s debt “unsustainable,” and said it was “difficult to stay afloat while carrying it.”

But the opposition to the transaction is significant. On the eve of Wednesday’s hearing, the industry trade association INCOMPAS called for the deal to be rejected, citing concerns that the combined company would increase wholesale prices on resellers of internet service. A group of nine senators, including eight Democrats and one independent — Bernie Sanders of Vermont — signed a letter that is calling for the merger to be blocked.

Phillip Berenbroick, senior policy counsel at the public interest group Public Knowledge, called some of the merger’s promised benefits “speculative,” and noted that both companies do not need to combine to build out 5G networks.

The companies said the merger would enable them to expand services for rural communities, with plans to cover 90% of the population with high-speed 5G service by 2024. Rep. Ben Ray Lujan (D-N.M.), however, questioned the details.

The companies have pledged to offer the same or better rate plans to its customers for three years after the merger is completed. But opponents who have formed a coalition called the 4Competition Coalition described the price pledge as an “empty promise.” Some analysts have speculated that the companies’ price pledge signals that the government is concerned about its impact on prices.

The decision on whether the merger gets a greenlight is not in the hands of Congress, but the FCC and the Department of Justice. But Democrats signaled that they would like to hold more hearings on prospective transactions because of the potential harms that come from consolidation.

“For the last eight years, industry consolidation occurred without any oversight, and the consequences of that negligence have been borne by consumers and hardworking Americans,” said Frank Pallone (D-N.J.), the chairman of the Energy and Commerce Committee.

The two companies were to face another hearing before a House Judiciary antitrust subcommittee on Thursday, but it was postponed because of the funeral of John Dingell, who was the longtime chairman of the Energy and Commerce Committee.