NEW YORK (Reuters) - The U.S. Department of Justice is examining how the proposed merger between T-Mobile US Inc (TMUS.O) and Sprint Corp (S.N) could affect prices for smaller wireless operators, according to two people familiar with the matter.
A T-Mobile and Sprint merger would eliminate competition between the two carriers that have been the dominant players in selling network access to wireless companies that often serve pre-paid or price-conscious consumers, and could lead to higher prices for those users.
The Justice Department, which is evaluating T-Mobile’s $26 billion deal to buy Sprint, has been speaking with small wireless operators that buy access to the major wireless networks at wholesale rates, and is seeking their opinions about the merger, the people said, who declined to be named because the talks are confidential.
Antitrust investigations are a normal part of the merger approval process, especially for large deals like T-Mobile’s.
A Justice Department spokesman and a T-Mobile spokeswoman declined to comment. Sprint did not immediately respond to requests for comment.
Including AT&T (T.N) and Verizon (VZ.N), there are four major U.S. wireless providers. Since the head of the Justice Department’s antitrust division recently refused to commit to keep four carriers after the T-Mobile deal is completed - an issue that contributed to AT&T dropping its pursuit to buy T-Mobile in 2011 - the department’s examination of the wholesale market suggests the government is giving the deal a thorough review.
David Glickman, chief executive of Ultra Mobile and Mint Mobile, two pre-paid wireless brands, also said Justice asked to speak with him about the merger, but said he was not given additional details about what the department wanted to discuss.
“A merger between T-Mobile and Sprint without any concessions would be bad for consumers, businesses and the country,” said Peter Adderton, founder and former chief executive of Boost Mobile USA, which was acquired by Sprint. Adderton is no longer affiliated with Boost Mobile’s business in the United States.
Adderton, who called for formal regulation of wireless wholesale prices after the T-Mobile-Sprint deal was announced, said it was “encouraging” to see the Justice Department reach out to learn about how the merger could affect businesses and consumers.
While AT&T and Verizon dominate the U.S. wireless market overall, T-Mobile is the most popular among customers who make less than $75,000 per year, and Sprint’s pre-paid brand Boost counts 83 percent of its users in that income range, according to data from Kagan, S&P Global Market Intelligence data.
T-Mobile has 38 percent of the U.S. pre-paid market, while Sprint has 16 percent, which would give the combined company 54 percent, according to S&P.
Reporting by Sheila Dang in New York; Additional reporting by Diane Bartz in Washington; Editing by James Dalgleish