What the T-Mobile, Sprint hearing means for the future of M&A in the US
Last Wednesday, members of Congress questioned T-Mobile CEO John Legere and Sprint's executive chairman Marcelo Claure about the two companies' $26 billion merger. The hearing was held before the Communications & Technology subcommittee of the House Committee on Energy and Commerce—which was significant in itself, marking the first time in almost nine years that particular subcommittee has held a merger hearing and potentially signaling an increase in Congressional oversight of M&A.
Scrutiny of the T-Mobile and Sprint deal has been going on for months, and many politicians are fighting the tie-up, which still needs to be approved by the Federal Communications Commission and the Department of Justice. The day before the hearing, nine US senators sent a letter to both the FCC and the DOJ, urging them to block the merger.
In the hearing, representatives pushed Legere and Claure to explain how the deal would benefit consumers. The executives argued it will let them compete with AT&T and Verizon, the two biggest carriers in the US. They also attempted to rebut assessments that the merger would lead to fewer jobs and higher costs, instead describing how both companies would need to hire more people and lower their prices to compete with the larger networks in deploying 5G. Legere also promised to roll out 5G without relying on any equipment from the Chinese companies Huawei and ZTE, both of which are distrusted by US national security experts.
Although the main focus was on T-Mobile and Sprint, the hearing may have broader implications for future mega-mergers. Rep. Frank Pallone, the ranking member of the House Energy and Commerce Committee, said in his opening remarks that reviewing major acquisitions is an obligation the committee has to the public interest.
"For the last eight years, major industry consolidation occurred without significant oversight, and the consequences of that have been borne by consumers and hardworking Americans," Pallone said. "In the past, we've seen mergers jack up consumer prices, cut away meaningful choices, and outsource, undercut and eviscerate good-paying jobs. We've seen previous merger conditions that weren't met or weren't enforced, we've seen the public interest in all its forms undermined, and that's why we must look carefully at these issues before a merger is approved."
Other members of the subcommittee expressed similar sentiments, and the current political climate is ripe for such a change. As more left-leaning politicians such as Alexandria Ocasio-Cortez bring greater hostility toward larger corporations, future mega-mergers with similarly public-facing companies could meet added scrutiny.
While it may just seem like a political power play to win credibility for their upcoming elections, political outcry has already had an impact on corporations. Amazon blamed in part Ocasio-Cortez's hostility for the ecommerce giant taking a step back from its planned headquarters in New York, even though she didn't have any local authority to block the move. With market trends moving toward more mega-mergers, as noted in PitchBook's 2018 Annual M&A Report, these larger mergers may become a new target for politicians and face more rigorous antitrust concerns.
As for T-Mobile and Sprint, it remains to be seen what happens next. The House Judiciary Committee, which has traditionally had antitrust oversight and had a hearing scheduled for last Thursday, delayed and then indefinitely postponed its public hearing on the merger.
