The merger between the third and fourth largest U.S. wireless carriers seems to be a lock. With nothing to stand in their way, managements of Sprint Corp. (NYSE: S) and T-Mobile US Inc. (NASDAQ: TMUS) are so far along that the companies have picked a CEO and explained in depth how the marriage will benefit American consumers. The deal just hit a snag. It is too early to say if it is a big one.
The Federal Communications Commission issued “A Letter Pausing the T-Mobile-Sprint Transaction.” The FCC wants to gather more information about the potential effects of the deal. The letter stated, in part:
Today we are pausing the Commission’s informal 180-day transaction shot clock in this proceeding. Additional time is necessary to allow for thorough staff and third-party review of newly-submitted and anticipated modeling relied on by the Applicants.
The FCC says that the infrastructure created by the merger would be different from the one initially proposed:
The newly-provided network engineering model is significantly larger and more complex than the engineering submissions already in the record.
And the plans for how the combined operation would work also have changed:
T-Mobile recently disclosed that it intends to submit additional economic modeling in support of the Applications, beyond that strictly responsive to the various economic analyses in the Petitions to Deny. This new economic modeling will also require additional time for review.
T-Mobile got its paperwork in late, so it may know already that it will take longer for the FCC to make a decision.
With each day that passes without the merger complete, there is more chance that the FCC will not support the deal. This would be a catastrophe, particularly for Sprint, which is the weaker of the two carriers by far and needs the combination to be a viable player. The two companies may want to contemplate a world in which they compete with one another, as they have for years.