In letters filed with the FCC Monday, T-Mobile and Sprint committed to keeping rate plans the same as they are today or better for three years after the duo’s proposed merger closes, if the deal is approved.
“Critics of our merger, largely employed by Big Telco and Big Cable, have principally argued that we are going to raise rates right after the merger closes,” T-Mobile chief executive John Legere wrote in a letter to FCC Chairman Ajit Pai. “I want to reiterate, unequivocally, that New T-Mobile rates are NOT going to go up. Rather, our merger will ensure that American consumers will pay less and get more.”
T-Mobile has no issue with the pledge being included as a formal merger condition, an ex parte filing shows, which specifically states: “New T-Mobile will make available the same or better rate plans as those offered by T-Mobile or Sprint as of today’s date for three years following the merger.”
However, New Street Research analysts say the commitment could indicate regulatory review of the $26.5 billion deal is swaying out of T-Mobile’s favor.
“The question for investors is whether this commitment is in indication that the deal is more likely or less likely to be approved,” New Street analysts wrote in a Tuesday research note. “Count us in the less likely camp. We admit the clarified commitment could represent a concession that DOJ and/or FCC staff (or the White House) asked for in exchange for agreeing to support the deal. But we think that is unlikely for a number of reasons.”
New Street notes the very need to make a price promise at this point signals the DOJ may not be responding well to T-Mobile’s economic arguments, which have asserted the deal won’t stifle or cause substantial harm to competition.
“The pledge opens the door to questions about why it is necessary if market forces would remain sufficient to constrain prices,” New Street wrote.
The firm also pointed to DOJ antitrust chief Makan Delrahim’s view on post-approval behavioral remedies, in that they can’t be depended on to solve issues of an anticompetitive merger.
“In light of that philosophy, offering such a concession suggests the company is seeking to garner support in the political realm, rather than trusting the antitrust authorities through their usual tools of economic analysis will agree that the merger would not cause substantial harm to competition,” the analysts wrote.
The letters suggest the government is still very concerned about the merger’s impact on prices, New Street notes. Indeed, Sprint and T-Mobile executives are slated to testify before lawmakers next week about the merger, and will face questions on pricing, competition and jobs.
Last month five senators on the Commerce, Science and Transportation Committee wrote a letter asking leadership to also hold a hearing on potential impacts from the merger.
Opposition group 4Competition Coalition, whose members include Dish Network, Communications Workers of America (CWA), C-Spire, Public Knowledge and NTCA, immediately released a statement criticizing T-Mobile’s price pledge.
“Committing to not raise ‘rate plans’ for three years is an empty promise that does not provide any real price protection for consumers,” 4Competition Coalition said. “In fact, T-Mobile’s announcement has confirmed exactly what their own data shows: The merger will eliminate wireless competition and increase prices for consumers. “
“The company’s pledge is riddled with loopholes and ensures that any network improvements will allow them to justify higher monthly bills, effectively rendering the pledge meaningless,” the group added.
T-Mobile’s price commitment notes that that the pledge is for three years after the merger “until better plans that offer a lower price or more data are made available,” whichever happens first.
However, the filing notes that those plans would still pass through cost increases in taxes, fees, surcharges, and third-party partners, which the company says are not within control of the “New T-Mobile.” Notably, device and handset offerings are also not included in the pricing commitment.
The filing also stipulates that “When a better post-merger plan is offered, New T-Mobile may discontinue a less appealing legacy plan.”
“Today’s news makes clear that T-Mobile knows that its merger is in trouble. Their response – inviting government agencies to regulate their behavior – seeks to impose precisely the kind of behavioral conditions that regulators have found insufficient in merger reviews,” 4Competiton Coalition stated.
As part of its push for regulatory approval T-Mobile has continued to say that the merger will create new jobs. On Wednesday, the companies named New York’s Greater Rochester area as the second location for one of five new T-Mobile Customer Experience Centers that are slated to be built if the deal goes through. The centers will cumulatively create up to 5,600 new U.S. jobs by 2021, according to T-Mobile. The latest facility will create at least 1,000 jobs, and joins the previously announced location of Overland Park, Kan.
Overall, the “New T-Mobile” will employ more than 7,500 more customer care representatives in 2024 using T-Mobile’s new Team of Experts customer care model than the stand-alone companies would.