T-Mobile's UScellular Buy Likely Faces Tough Questions From Regulators
T-Mobile’s proposed acquisition of UScellular’s wireless operations, including about 30% of its spectrum, has already seen opposition (see 2405280047), with more expected. In addition, the deal will likely face heavy scrutiny from DOJ and the FCC, industry experts agree. Handicapping whether the transaction will receive approval is difficult, especially headed into a presidential election in November, industry officials say. Some of the 21 states where UScellular has a presence could play at least limited roles reviewing the deal, state and other officials said. T-Mobile’s buy of Mint and other assets from Ka’ena, a smaller deal that didn’t involve spectrum, took regulators more than a year to approve.
The FCC is expected to take a deep dive into spectrum questions. Will the deal put T-Mobile over the threshold for holdings in each market?
T-Mobile is the nation’s second-largest wireless carrier, behind only Verizon, and has closed the gap with Verizon each quarter as its growth continues. The buy would give T-Mobile an additional 4.5 million retail connections.
It could face a tough road under the Biden administration and its future could change depending on election results, wireless industry lawyers said Thursday. Officials at several consumer and public interest groups said they are still formulating their position on the deal. However, Public Knowledge went public in its opposition as soon as the deal was unveiled.
“There is more skepticism of all mergers across the administration today,” Joe Kane, Information Technology and Innovation Foundation director-broadband and spectrum policy, said in an email. “The ideological, anti-big reaction will be a factor in how the merger develops and whether regulators feel empowered to attach extraneous conditions to it.”
But Kane noted that such combinations are generally good for consumers and let the combined company “take advantage of economies of scale to reduce costs and increase the reach and quality of their service.” The wireless industry is also intensely competitive “and mobile carriers are increasingly just part of the broader broadband market,” which means more consolidation is likely, he said.
Boost Mobile founder Peter Adderton raised concerns on X, formerly Twitter, saying “there is NO way” T-Mobile should receive approval for buying UScellular’s customers, and they should have to be divested to a mobile virtual network operator. Why not let Verizon or AT&T buy Dish Wireless, he asked. “It's clear the regulators have given up and now believe 3 [national carriers] is enough in the market so MVNOs are all we have left,” he said.
Analysts disagreed on whether the buy will pass regulatory muster.
Tegna Implications
TD Cowen’s Paul Gallant warned that the Tegna/Standard example wasn’t encouraging for T-Mobile. That deal fell apart after the Media Bureau designated it for hearing, a step that historically doomed a proposed transaction (see 2302240068). “Post-Tegna, merging companies are on high alert given the FCC chair can single-handedly block mergers without the companies getting their day in court,” Gallant told investors.
DOJ is likely to look closely at market share “and the companies' pricing/promotion strategies in the cities where the companies overlap,” Gallant said: “Wireless operators set prices nationally, so we suspect this will not be a significant problem.” The FCC will likely focus on whether the spectrum purchased pushes T-Mobile above a third of key spectrum bands in different markets: “If the merger would give T-Mobile more than 1/3, the agency takes a more cautious, case-by-case review.” Gallant also sees the level of opposition as key.
"Even apart from T-Mobile exceeding soft spectrum caps in certain markets, predictable consumer unhappiness over major [mobile network operator] pricing is near certain to elicit election year antitrust scrutiny from the Biden Administration," Benchmark analyst Matthew Harrigan wrote.
“We would expect regulators to scrutinize the transaction regardless of the administration in office,” said Key Banc analyst Brandon Nispel. Key Banc saw “fairly compelling consumer benefits” given that UScellular “lacks scale to compete both on a regional and national level.”
T-Mobile “has always been the logical buyer of UScellular’s assets, going back to their earliest days after the VoiceStream acquisition in 2001 that created T-Mobile in the first place; the regional spectrum portfolios of the two companies were once upon a time a hand-in-glove fit,” said MoffettNathanson’s Craig Moffett. He sees spectrum aggregation rules as a potential roadblock: “Today, the question isn’t so much whether T-Mobile needs the spectrum as it is whether they will be allowed to buy it.”
S&P Global Ratings predicted the deal will close in mid-2025, as the companies project. Since T-Mobile is acquiring just some of UScellular’s spectrum and “will likely remain below any spectrum caps, we do not anticipate prohibitive regulatory hurdles related to the transaction,” the firm said.
State Review
UScellular has a large presence in Maine but a representative for the state’s telecom regulator explained it would play a nuanced role in the transaction. While the Maine Public Utilities Commission doesn’t regulate cellphone service and wouldn’t “be approving or denying the acquisition itself,” UScellular is a high-cost eligible telecommunications carrier (ETC) “that receives up to $6.6 million annually in federal funds so that it may offer mobile wireless service to consumers in rural high cost areas of Maine,” a PUC spokesperson said. “There may be some process at the Commission through which it would be determined whether T-Mobile would take over [UScellular’s] ETC obligations or request to be relieved of its obligations and the federal support that [UScellular] currently receives.”
Maine Public Advocate William Harwood said his office doesn’t “usually get involved in advocating for cellular customers, as those providers are generally not considered public utilities under Maine law.” In an adjacent state where UScellular has a presence, the New Hampshire Public Utilities Commission said it avoids “comment on a pending matter or a matter that may come before the Commission.”
California regulators could get involved because UScellular is in the state’s northernmost regions, between the Bay Area and Oregon. The California Public Utilities Commission historically hasn’t been shy about digging into telecom deals. The CPUC applied conditions when it approved T-Mobile/Sprint two weeks after the companies said the deal was closed (see 2004160054).
California commissioners disagreed with the companies’ claims at the time that the CPUC lacked authority over wireless transactions and that review of a Sprint wireline transfer was no longer needed because Sprint moved customers to VoIP.
The CPUC didn’t comment on the UScellular agreement. But a California consumer advocate raised concerns. It’s “yet another example of the concerning consolidation of the cellular phone industry, particularly with T-Mobile's recent acquisitions of Sprint and Mint,” said Ashley Salas, The Utility Reform Network telecom regulatory and policy attorney. T-Mobile recently refused to continue (see 2403110042) as a service provider for a California program for foster youth, noted the TURN official: UScellular “advertises heavily in the AARP magazines and likely has a lot of senior customers who will be impacted by the acquisition."
States with merger oversight where T-Mobile and UScellular are present probably will weigh in on the deal, Sherry Lichtenberg, NARUC senior manager-policy, wrote in an email. “It shouldn’t be any different than the way those states weighed in on the T-Mo/Sprint merger."