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How a Top Antitrust Official Helped T-Mobile and Sprint Merge

WASHINGTON — As the $26 billion blockbuster merger between T-Mobile and Sprint teetered this summer, Makan Delrahim, the head of the Justice Department’s antitrust division, labored to rescue it behind the scenes, according to text messages revealed this week in a lawsuit to block the deal.

Mr. Delrahim connected company executives with the F.C.C. and members of Congress. And he gave executives insight into the thinking of Ajit Pai, the chairman of the F.C.C. who would also have to approve the merger.

He is “open and willing” to discussions about the deal, Mr. Delrahim said in one text message in June, a month before regulators blessed the transaction.

The messages between Mr. Delrahim and the executives involved in structuring one of the telecom industry’s most significant mergers in generations provide a rare inside look at the hands-on work the Justice Department’s top antitrust official undertook to shape the deal.

While it is not unusual for a law enforcement official to work behind the scenes to help companies overcome antitrust concerns, efforts like the one undertaken by Mr. Delrahim are almost always hidden from view.

The text messages show that he played a crucial role in bringing together top executives of T-Mobile, Sprint and another company, Dish, for negotiations. The Justice Department has said it would not have approved the merger without the emergence of another competitor like Dish.

The Obama administration rejected an earlier proposed merger between the companies, and it remains deeply unpopular with some consumer groups who fear it will increase prices for Americans, especially in rural areas.

Mr. Delrahim oversaw the often hostile talks between the companies, while pulling strings to get lawmakers and other regulators on board.

“Had a generally good chat with the chairman,” Mr. Delrahim wrote to Charles Ergen, the chief executive of Dish, the company that would prove crucial to the deal’s passage. The following day he encouraged Mr. Ergen to lobby lawmakers to urge Mr. Pai to approve new deal terms that would give Mr. Ergen more time to build out a competitive telecom business.

Mr. Ergen did so. He told Mr. Delrahim that he had “very good” meetings in Washington and that he talked to Mitch McConnell, the Senate majority leader, about the deal, according to the text messages.

When asked about the text messages, a Justice Department spokesman said that “the Antitrust Division is proud of its work in reviewing this important merger on behalf of the American consumer,” but declined to comment further.

T-Mobile and Dish declined to comment on the messages, which were submitted as evidence in a legal challenge to the merger led by the New York and California state attorneys general. Sprint didn’t immediately respond to requests for comment.

The messages also show that SoftBank, the Japanese conglomerate that owns the majority of Sprint, discussed lending Dish money to buy the assets it needed to become a telecom company.

In such an arrangement, SoftBank would essentially be financing a competitor to its own company, Sprint. But SoftBank also stood to lose financially if a Sprint-T-Mobile merger did not happen.

SoftBank declined to comment on Thursday.

In one strained exchange, Mr. Ergen told John Legere, the chief executive of T-Mobile, that he was still working to get terms of a deal done, pending board approval and “any other issues from our/your team.”

“And waiting on Softbank to finance the deal?” Mr. Legere wrote.

Mr. Ergen said publicly this week that several potential lenders had emerged to help his company buy assets, including JPMorgan Chase and SoftBank.

Sprint and T-Mobile, the third- and fourth-largest wireless companies, announced their latest merger plans in April 2018. The carriers promised their union would allow them to combine resources and bring the next generation of wireless broadband, known as 5G, for fifth generation, to rural America. They would have a combined 80 million United States subscribers.

The Justice Department announced its approval of the deal in July, citing the creation of a fourth and new competitor in Dish, which would buy assets from Sprint and T-Mobile to become a telecom company. In a parallel review, the chairman of the Federal Communications Commission announced it planned to approve the deal weeks later.

The merger is being challenged in court by several states and cannot close until that lawsuit is resolved. State attorneys general in New York and California are unconvinced that Dish will provide true market competition.

“Dish is a struggling satellite TV firm with no experience running a mobile wireless business — and no current mobile wireless business,” Paula Blizzard, California’s deputy attorney general, said on a call with journalists this month. “We cannot count on Dish one day in the future somehow growing into a viable wireless company equal to Sprint’s reach today.”

Mr. Delrahim was pressured to block the merger throughout the department’s review. Several Democratic lawmakers, consumer groups and state attorneys general said the deal would harm consumers by reducing the number of national wireless carriers to three from four. The reduction in competition would most likely lead to higher consumer wireless bills, the critics warned.

To salvage the deal, the companies came up with a solution: bring in Dish Network to buy some of their wireless assets to form another competitor and maintain four national mobile carriers.

Mr. Delrahim told reporters at a press event in July that the deal would not have passed muster without Dish, which had agreed to buy Sprint’s prepaid wireless service, Boost, for $5 billion, as well as other assets from T-Mobile.

“We were prepared to sue to block the deal,” Mr. Delrahim said in July, when he announced his approval.

In texts sent this May and June, Mr. Delrahim helped coordinate meetings between Mr. Ergen, Mr. Legere and Marcelo Claure, the chief operating officer of SoftBank and the chairman of the Sprint board, as they negotiated asset sales to Dish.

“I anticipate being part of the meeting and then leaving it to you guys to hash out details as needed,” Mr. Delrahim wrote in one text to Mr. Ergen about a meeting with Mr. Legere.

The telecom executives gave Mr. Delrahim regular updates on their often difficult negotiations. Both T-Mobile and Sprint executives were frustrated at times with Mr. Ergen, who told them he needed time to get his board to approve aspects of the deal.

“Why do you always play games. You got a deal of a lifetime and don’t blow it,” Mr. Claure told Mr. Ergen. “And you control your board.”

Mr. Legere and Mr. Ergen were sometimes hard to wrangle. At one point, when Dish sought funding from SoftBank, Mr. Legere was indignant.

“You’ve crossed the line,” he wrote. “For full disclosure (which may be a new term to you) I have told Makan I don’t believe you are serious about doing a deal.”

Mr. Delrahim seemed aware of the friction. In one set of messages, he invited Mr. Ergen to a meeting the next day with Mr. Legere and Mike Sievert, the president of T-Mobile, in his conference room at the Justice Department. “2pm confirmed,” Mr. Delrahim wrote. “I have not told John and Mike the meeting is w you yet, I will tell them in the AM.”

But the day the meeting was scheduled, Mr. Delrahim gave Mr. Ergen an update about a long talk he had held with Mr. Legere, Mr. Sievert and Mr. Claure.

“John is going to reach out to you,” Mr. Delrahim wrote. “May make good sense for you all to meet alone at 2, and then we all meet later today? I will make myself available.”