With a Regulator Like This, Who Needs an Investment Banker?

(Bloomberg Opinion) -- The merger of T-Mobile US Inc. and Sprint Corp. is an abomination. It reduces the number of wireless companies to three from four, defies decades of legal precedents and all but assures higher prices for consumers. My Bloomberg Opinion colleague Tara Lachapelle lays out all the sorry details here.

I’d like to aim my focus on the deal’s investment banker: Makan Delrahim. True, the head of the Justice Department’s antitrust department wasn’t officially the investment banker. But unofficially, the man responsible for deciding whether the deal would proceed worked hard behind the scenes to make it happen. He ought to get a fee.

The Obama administration had rejected the deal earlier, and most analysts thought President Donald Trump’s Justice Department would turn it down as well. One of the big issues was what the deal would mean for the next-generation wireless network, known as 5G. If T-Mobile and Sprint merged, another company that was willing and able to build its own 5G network to compete with the other wireless carriers would have to come to the fore.

According to texts that were made public as part of a lawsuit, Delrahim “played a crucial role in bringing together top executives of T-Mobile, Sprint and another company, Dish Network LLC, for negotiations,” as the New York Times put it. He coached executives of the three companies on how to approach legislators and persuade them to put pressure on Ajit Pai, the chairman of the Federal Communications Commission, which also had to approve the deal. He gave his personal email address to Dish Chairman Charles Ergen so they could communicate behind the scenes.

In the end, T-Mobile agreed to give Dish access to its network while the latter company — which has plenty of spectrum but has never been in the phone business — built its 5G competitor. (T-Mobile also made the somewhat unlikely promise that it would cover 97% of the U.S. with its own 5G network within three years.) Having brokered the Dish deal, Delrahim then approved T-Mobile’s acquisition of Sprint.

In an article about Delrahim’s involvement, the Times said that “it is not unusual for a law enforcement official to work behind the scenes to help companies overcoming antitrust concerns.” In fact, it is extremely unusual — or at least it was before the Trump administration came along. Government regulators aren’t supposed to broker deals; they’re supposed to judge whether they pass antitrust muster.

Usually, state attorneys general and the Justice Department are aligned on whether or not a deal should be approved. Not this time. When 13 states (plus the District of Columbia) sued to block the merger, Delrahim didn’t leave it to the companies to defend their deal. The Justice Department filed a brief on the side of the companies.

If the states prevailed, he told the court, it would create chaos in the merger market because companies could no longer be sure that federal approval was all they needed to make a deal. He said that his division had expertise that the states lacked and therefore the court should defer to federal antitrust officials. Earlier, he told the Wall Street Journal that he “worries the merger market could suffer if the states prevail”— as if that’s his job.

Why was Delrahim so gung-ho to push through the T-Mobile-Sprint deal? Because his boss, President Trump, wants to see the U.S. beat China in the race to establish 5G as the standard network — and that’s what T-Mobile was essentially promising. As regular readers know, the antitrust chief has consistently carried Trump’s water, opposing deals proposed by companies the president wanted to punish, like AT&T-Time Warner, while waving through deals proposed by his allies, like Disney-21st Century Fox. Most absurd of all, Delrahim’s division even sued the auto companies — on antitrust grounds — that sided with California over Washington in a fight over emissions standards. (The suit was dropped late last week.)

Delrahim is one of the more public members of the Trump administration. He regularly gives high-minded speeches before groups that have an interest in antitrust law. He often harks back to old Supreme Court decisions, to important moments in antitrust, to the importance of protecting consumer welfare. To hear him talk, you’d think he was just as concerned with the rule of law as any of his predecessors.

But to watch him act — as he just did during the T-Mobile-Sprint deal — is to realize that he’s just another Trump lackey putting the president before the people he’s supposed to serve.

The real bankers, interestingly, were two relatively new players: PJT Partners Inc., which advised T-Mobile US Inc., and the Raine Group, which counts Sprint’s parent Softbank Group Corp. among its clients.

To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."

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