Will T-Mobile Keep Disrupting After the Deal?

John Legere, chief executive of T-Mobile, is cleverly trying to placate the president by promising that the deal will create jobs in Trump states and keep the U.S. from falling behind China in the race for fifth-generation wireless technology, or 5G. Those arguments won’t matter much to the antitrust division of the Justice Department or Federal Communications Commission, and they may not even convince Mr. Trump.

Mr. Legere has promised $6 billion in savings from the deal. At least $2 billion will come from cuts in sales and marketing spending and in the head office. It will be hard to hit those numbers without cutting staff.

Regulators will be concerned with the anticompetitive effects of the deal—namely higher prices for customers. The two companies are the main competitors for cheap wireless plans, says Gene Kimmelman, a former antitrust attorney at the Justice Department. “The merger would dramatically reduce competition for low-cost plans.”

If regulators oppose the deal, it will be because they believe T-Mobile will end its maverick ways after it acquires Sprint. In the past five years, the company has added 40 million customers, driving its competitors to unlimited data plans and keeping basic wireless plans flat. Regulators will see T-Mobile’s success in disrupting the market after AT&T’s attempt to buy it was blocked as evidence that they made the right call.

The companies will argue the opposite. “Where T-Mobile has a good point is that they are the maverick and by taking over Sprint, which has basically been neglected under SoftBank, they’ll actually be adding more competition to the market and putting more pressure on Verizon and AT&T to innovate,” says Ketan Jhaveri,  a former antitrust attorney for the Justice Department’s Telecommunications Task Force.

AT&T’s failed attempt to buy T-Mobile will also make it hard to convince regulators that the deal is needed for the companies to access 5G technology. AT&T had claimed that it needed T-Mobile’s spectrum to deploy fourth-generation LTE technology, but after the deal was blocked, AT&T got there anyway.

The hardest bar to cross might be market concentration when there are only three carriers.

Research firm MoffettNathanson says that under the Justice Department’s merger guidelines, the increase in concentration in the wireless industry caused by a Sprint-T-Mobile merger would typically trigger the department to oppose the deal.

T-Mobile and Sprint will need more than a public relations onslaught to get their deal approved.