Bernstein Research says that if T-Mobile and Sprint drop their merger plans, as expected, it will benefit other potential merger partners Comcast/Time Warner Cable and AT&T/DirecTV, as well as the regulator faced with those two, already filed, deal proposals.
The Wall Street Journal reported Late Tuesday that the telcos planned to pull the plug on their planned meld, which the FCC and Justice had already signaled would be an uphill climb.
In a note to clients, senior analyst Paul de Sa and his team said that they continued to expect Comcast/TWC and AT&T/DirecTV to be approved and close by the first quarter of 2015. The benefit to them of taking T-Mobile/Sprint out of the equation is one less mega-merger being filed that could slow down the review processes at the FCC.
The FCC will benefit, they suggest, for that same reason, as well as gaining more certainty around the 600 MHz auction and showing that "– it can still be a relevant institution, able to resist high-profile lobbying campaigns and ignore distractions such as auction promises and attempts to negotiate by press leak."
Sprint and T-Mobile said they would bid some $10 billion in the incentive auction, but only if the government allowed them to merge.
Free Press added that the news of the planned merger was being scuttled was also a benefit to consumers.
“Sprint’s decision to drop its bid for T-Mobile is good news for mobile users," said Free Press President Craig Aaron. "The deal could have stifled competition, squelched innovation and driven up prices. Give the FCC and DOJ credit for throwing cold water on this deal from the start. This should send a message to Comcast and AT&T, which are also lobbying Washington for approval of ill-advised mergers: Start paying more attention to the needs of your customers rather than scheming to swallow up the competition. Consumers win when mega-deals like this never materialize.”
UPDATE: FCC chairman Tom Wheeler signaled he thought Sprint and T-Mobile had made the right move.
“Four national wireless providers is good for American consumers,” he said in a statement. “Sprint now has an opportunity to focus their efforts on robust competition.”
Analyst Craig Moffett of MoffettNathanson Research says Wheeler's FCC was the big winner in the no-deal. In his note to investors, Moffett said the FCC was the big winner, and perhaps broadcasters as well.
Now there will have to be four bidders for incentive auction spectrum instead of three. Plus, the FCC can take a "victory lap," he says, for "having been the cop on the beat in blocking at least one mega-deal out of an unprecedented, and unpopular, media consolidation wave."
If it seems unusual for the FCC and Justice to weigh in on a merger before it is even proposed, it is, but there's a reason. The companies approached the FCC and its chairman for input on prospects for the deal, which was never formally filed, after The FCC got in contact with the Justice Department since it generally coordinates merger reviews--DOJ's focus is on competition and not violating antitrust, the FCC also looks at competition, but also to how a deal affirmatively serves the public interest.
After kicking the tires, both the chairman and DOJ expressed skepticism about the wisdom of reducing the Big Four to the Big Three--Sprint and T-Mobile were suggesting it was more like increasing the Big Two to the Big Three by letting smaller carriers combine to more effectively compete with Verizon and AT&T.
"All the high-priced lobbying in the world couldn't change the facts in the proposed deal," said an FCC official characterizing the FCC's informal vetting and the companies decision, ultimately, not to try and do the deal.
