Sprint Drops After Democrat on FCC Calls for Pause of Merger

(Bloomberg) -- Sprint Corp. dropped after a Democratic member of the Republican-majority Federal Communications Commission called for delay in considering the company’s merger with T-Mobile US Inc.

Commissioner Geoffrey Starks reacted after the agency said Sprint had claimed payments for 885,000 subscribers to a subsidized phone service, even though those people weren’t using the system.

“This raises questions about character and the thoroughness of our record,” Starks said in a tweet. “The merger should be paused until we figure this out.”

The FCC is considering T-Mobile’s proposed $26.5 billion purchase of Sprint. FCC Chairman Ajit Pai has recommended the agency approve the deal, and two other members of the five-person commission have said they are likely to go along. The agency is in the midst of a closed-door voting period that could last until late September.

States are suing to block the deal combining the third- and fourth-largest U.S. wireless carriers, arguing that it will decrease competition and raise prices. The deal’s backers say it will quickly bring advanced 5G networks and raise a stronger rival to leaders AT&T Inc. and Verizon Communications Inc.

Sprint on Tuesday said it made an error adjusting to new rules surrounding the program for federally subsidized phone service. “We are committed to reimbursing federal and state governments for any subsidy payments that were collected as a result of the error,” Lisa Belot, a spokeswoman, said in an emailed statement.

Sprint dropped almost 4%, and was down 20 cents, or 2.96%, at 2:02 p.m. in New York.

In its statement about the subsidy program known as Lifeline, the FCC said payments to those not using the system represented nearly 30% of Sprint’s subscribers to the program.

“It’s outrageous that a company would claim millions of taxpayer dollars for doing nothing,” Pai said in the statement. “This shows a careless disregard for program rules and American taxpayers.”

Pai said he had asked the agency’s enforcement bureau to investigate.

Tina Pelkey, a spokeswoman for the FCC, didn’t respond to a request for comment.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net;Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

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