T-Mobile-Sprint Merger Odds May Rise on Cable Move to Mobile
(Bloomberg) -- Cable companies have begun offering wireless phone service that uses networks built by big mobile carriers -- a trend that could ease the way for T-Mobile US Inc. and Sprint Corp. to merge.
That’s because regulators are more likely to approve the deal if they conclude there will still be sufficient competition even if the third and fourth biggest mobile providers combine.
They are examining the idea. One of the regulators deciding whether to allow the merger, the Federal Communications Commission, this week asked the largest cable companies, Comcast Corp. and Charter Communications Inc. for details about their new mobile offerings.
“If anything this is a positive sign for the T-Mobile Sprint deal,” Amy Yong, an analyst with Macquarie, said in an interview. “It’s an option the FCC can point to as it serves its role in protecting consumers.”
The $26.5 billion merger proposed in April would cut the number of nationwide wireless providers from four to three. A finding that cable companies such as Comcast and Charter offering wireless service are competitors would ease the path to approval by the FCC and antitrust regulators at the Justice Department.
Comcast, the largest U.S. cable provider, added a wireless offering for its customers last year and more than 780,000 of them already have signed up. Comcast uses Verizon Communications Inc.’s airwaves and 19 million Xfinity Wi-Fi hotspots to offer its mobile service, and No. 2 cable provider Charter also offers mobile service using Verizon airwaves. Smaller Altice USA has a deal to use Sprint’s airwaves and also got a query from the FCC this week about its phone service.
T-Mobile said in a filing that cable providers getting into the wireless business shows “the intensity of current competition in the sector.”
There are skeptics.
“Is Comcast selling service to anybody who’s not a Comcast video or broadband customer?" said Gene Kimmelman, a former antitrust official who is president of the policy group Public Knowledge, which opposes the merger. “If they’re not trying to market to them, they’re not trying to grab them, that eliminates 80 million households that Sprint and T-Mobile compete for.”
T-Mobile rose 34 cents, or 0.5 percent, to $69.29 at 10 a.m. after rising as much as 1.1 percent. Sprint, based in Overland Park, Kansas, was up 2 cents to $6.55.
Sena Fitzmaurice, a Washington-based spokeswoman for Comcast, declined to comment on the FCC’s request for information, as did Tina Pelkey, an FCC spokeswoman. Tara Darrow, a spokeswoman for Bellevue, Washington-based T-Mobile, didn’t reply to a request for comment.
The cable companies resell wireless service they get from Verizon at wholesale prices. Mobile phone services like Google’s Project Fi and TracFone Wireless Inc. also operate through similar deals with wireless carriers.
The arrangements are sometimes called virtual networks.
The FCC has traditionally not counted them as separate competitors from the networks that play host to them, saying the virtual networks don’t compete through network investments and upgrades, as do providers that own wireless towers and antennas.
“I seriously doubt it takes away the competitive concerns that have been raised,” Kimmelman said.
The FCC shouldn’t ignore the virtual networks, because the cable providers have the wherewithal to expand service, Michelle Connolly, a Duke University economics professor, said in a September report underwritten by T-Mobile.
Comcast and Charter will become “strong competitors” in part because they have an existing base of 57 million customers and fixed networks that pass almost an equal number, offering the possibility of expansion, Connolly said in the September report.
“There’s a sea change going on," Connolly said in an interview. “This is only going to increase.”
Comcast offers its wireless product, called Xfinity Mobile, as an add-on to customers that already take its internet service. The product works by using airwaves, and also using Wi-Fi signals emitted by Comcast gear in subscriber homes and businesses. The Philadelphia-based cable provider and Verizon agreed to the airwaves use in 2011, in a deal that also sent spectrum licenses to Verizon.
The FCC in its correspondence Wednesday asked Comcast to identify the providers its mobile customers may have abandoned, how the handoff works between Wi-Fi and the mobile network, and for any plans to develop its own wireless facilities.
The agency also asked Comcast to describe how the T-Mobile transaction could impact the company’s TV and broadband businesses. Advanced wireless service, like the fast 5G network T-Mobile promises, could become a new cord-cutting option for almost 90 million U.S. households that now get broadband, phone and TV via cable or satellite.
The T-Mobile and Sprint merger would push up prices and diminish innovation according to opponents including Dish Network Corp. and policy groups such as Common Cause and Consumers Union. The two companies say their deal would produce a stronger competitor to larger AT&T Inc. and Verizon, and provide them the heft needed to quickly build a fast 5G network.
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