Derek Horstmeyer
By claiming they cannot fully upgrade to the next generation of wireless technology without a merger, T-Mobile and Sprint are playing to the concerns of the Trump administration, a George Mason University professor said.
“It seems like the right tactic to go with at this time,” said assistant professor of finance Derek Horstmeyer, who has an expertise in mergers and acquisitions. “You have an administration that really is scared that China is going to be the leader in this advanced technology.”
If the merger goes through, it would produce the third largest telecommunications company behind AT&T and Verizon. T-Mobile and Sprint might say their combined assets will create the strength to compete with the other giants, which would be good for consumers, Horstmeyer said, adding that the claim is dubious.
“When we see industry consolidation happen—whether it’s telecommunications or health care—it’s usually not good for the small players, and it’s not good for innovation,” he said. “This is why the Justice Department is going to be skeptical of this.”
Skeptical in the same way Obama administration was of the proposed 2011 merger between T-Mobile and AT&T, he said. Those companies also tried to sell their deal with a promise of network upgrades. That argument was rejected, and both companies subsequently flourished.
“Right after that got rejected, industry competition went crazy,” Horstmeyer said. “Some say it was the best thing to happen in terms of competition in the industry.”
Which brings us back to playing to Trump’s fears about China.
“They’re being very strategic, and they’re playing right to Trump,” Horstmeyer said. “If Trump has any say over the FCC chairman and the Justice Department in forcing their hand, he may force them to push them in the direction of accepting this, if you buy the argument that we need to let this merger go for the sake of 5G.”
Derek Horstmeyer, who has a PhD in finance and business economics from the University of Southern California, can be reached at 703-993-9761 or dhorstme@gmu.edu.
For more information, contact Damian Cristodero at 703-993-9118 or dcristod@gmu.edu.
About George Mason
George Mason University is Virginia’s largest public research university. Located near Washington, D.C., Mason enrolls 36,000 students from 130 countries in 49 states and the District of Columbia. Mason has grown rapidly over the past half-century and is recognized for its innovation and entrepreneurship, remarkable diversity and commitment to accessibility.