Proposed T-Mobile/Sprint Merger Would Cause Substantial Harm to Working People and Consumers

CWA to FCC: "When Merger-Related Harms are Predictable and the Benefits Speculative, the Merger Fails the Public Interest Test"
Wednesday, October 31, 2018

Washington, D.C. – The Communications Workers of America (CWA) today submitted new comments to the Federal Communications Commission (FCC) on the proposed T-Mobile/Sprint merger. The new filing assesses the companies' insufficient responses to CWA's initial comments to the FCC and finds that T-Mobile and Sprint have failed to show that there would be verifiable, merger-related public interest benefits that would outweigh the substantial harm the deal would cause to working people and consumers.

According to CWA Research and Policy Director Debbie Goldman, "CWA's FCC filings make it clear that while the merger's harms to the public interest are predictable and well-documented, the supposed benefits of the merger remain highly speculative and unsubstantiated. The FCC should not approve this merger as presently constructed."

Notably, while T-Mobile and Sprint continue to make vague promises that the merger will create thousands of jobs, the data and the companies' track records tell a different story. An updated analysis in CWA's new comments finds that the merger would result in the loss of approximately 30,000 jobs across the country – 25,500 job cuts from the elimination of duplicate retail stores and another 4,500 job cuts due to duplicate headquarters functions. Additional state-level detail on job loss is available here.

Today's FCC filing includes the following key arguments and assessments:

  • T-Mobile and Sprint have failed to refute CWA's well-documented evidence that the merger will result in substantial job losses through the consolidation of duplicative retail stores and headquarters functions. CWA had previously estimated that the proposed merger would result in the loss of more than 28,000 jobs. This initial analysis was, if anything, too conservative. CWA has refined the analysis with additional data, and shows in the Reply Comments that the merger is likely to eliminate 30,000 jobs. In a feeble attempt to refute CWA's methodology, T-Mobile and Sprint claim that CWA's analysis did not account for expanded staffing at stores that would remain open following the merger and for planned store growth in rural areas. This claim is demonstrably false, as CWA's analysis clearly (and repeatedly) addressed expanded staffing at surviving stores and in rural areas. T-Mobile and Sprint do not rebut CWA's estimate of the number of jobs that would be eliminated as a result of the proposed transaction, nor do they provide alternative detailed calculations. The omission is hardly accidental, as the companies have publicly suggested, even after CWA's comments were filed, that store closures are likely if the merger takes place.

    The FCC should not approve the merger without verifiable and enforceable commitments by T-Mobile and Sprint to ensure that the transaction does not cause a reduction in U.S. employment, that no employees of T-Mobile or Sprint will lose a job as a result of this transaction, that T-Mobile and Sprint will return all overseas customer call center jobs to the U.S., and that the companies commit to abide by all labor and employment laws and to maintain neutrality in allowing their employees to form a union of their own choosing, free from any interference by the employer.
  • T-Mobile and Sprint fail to refute the overwhelming evidence that the proposed horizontal merger is anticompetitive and illegal. Under well-established merger analysis and case law, the transaction is presumed to be anticompetitive. T-Mobile and Sprint do not dispute the most critical facts. The merger would eliminate substantial head-to-head competition between two close rivals. It would result in 92 percent of the population of the United States – or more than 284 million people – living in counties in which the new T-Mobile's spectrum holdings (a key input for wireless networks) would substantially exceed the FCC spectrum screen. And it would increase concentration in what the Horizontal Merger Guidelines consider "highly concentrated markets" to levels far in excess of the thresholds that the Guidelines presume to be likely to enhance market power.

    In an effort to overcome the presumption of illegality, T-Mobile and Sprint rely primarily on economic theory. But no one (not even a Ph.D. economist) can really or reliably predict efficiencies three to five or more years in the future, particularly when those efficiencies are premised on numerous assumptions about future technology, unproven business cases, and significant integration challenges.

  • T-Mobile and Sprint have not come close, by any stretch of the imagination, to providing the kind of evidence that is sufficiently rigorous and well documented to satisfy the FCC's high evidentiary standard to prove verifiable public interest benefits that will result from the merger. T-Mobile and Sprint do not rebut Dr. Andrew Afflerbach's Declaration that was submitted in CWA's initial Comments to the FCC. In that Declaration, Dr. Afflerbach describes a number of basic engineering problems associated with providing 5G services in a rural setting and concludes that for the great majority of rural Americans, "the level of coverage and capacity would be similar for the merged New T-Mobile network and the stand-alone T-Mobile network." In connection with CWA's Reply Comments, Dr. Afflerbach reviewed T-Mobile and Sprint's internal engineering documents. He has submitted a confidential Supplemental Declaration confirming and expanding on his conclusion that New T-Mobile would only marginally improve rural service relative to a standalone T-Mobile.

    The companies also fail to address, much less refute, CWA's arguments that Sprint is a viable firm and is not "failing." Analyst reports cited in CWA's initial Comments conclude that Sprint continues to be an effective competitor and Sprint management has asserted that it "very, very well positioned" for 5G. Today, on its third quarter 2018 earnings call, Sprint CEO Michael Combes touted Sprint's "strong momentum" adding subscribers, growing revenue and earnings, with substantial investment in its network.

    Finally, the companies' plead amnesia when confronted with statements that standalone T-Mobile and standalone Sprint are each well positioned to build a nationwide 5G network. As recently as yesterday, CEO John Legere on T-Mobile's third quarter 2018 earnings call reaffirmed that standalone T-Mobile will build 5G in "hundreds of cities" across the U.S. in 2018 and will have a national 5G network by 2020. And today, CEO Michael Combes on Sprint's third quarter 2018 earnings call explained that Sprint is far along in its network build for 5G, with plans to launch in the first half of 2019. For more than two years, former Sprint executive chairman Marcelo Claure has been asserting on the company's earnings calls how well positioned Sprint is to execute on its 5G plans, givens its abundance of spectrum and the progress it has been making on its network.
  • T-Mobile and Sprint fail to show how their merger will strengthen U.S. national security. T-Mobile and Sprint fail to clarify how technological leadership in 5G directly translates to a net benefit to national security. These claims also conveniently ignore the extensive ties between the T-Mobile and Sprint's parent companies and Chinese government-owned entities in matters related to 5G development, an area the companies claim as directly relevant to U.S. national security interests. Their argument is also in tension with U.S. lawmakers' continued characterization of Huawei as a national security threat. The FCC should not move forward in its review of the merger until after the Committee on Foreign Ownership in the United States (CFIUS) has ensured that Sprint fully complied with the 2013 Softbank/Sprint/Clearwire merger National Security Agreement and T-Mobile and Sprint make binding commitments to terminate any existing relationships with vendors that pose potential security threats and remove all equipment from these vendors' operations. Furthermore, the FCC should require T-Mobile and Sprint to participate in regular national security audits to ensure compliance with FCC standards.

Read the full version of the new CWA submission to the FCC here.