When Peter Adderton started Boost Mobile in 2000, his goal was providing competitive wireless service to struggling consumers, a market he believed large carriers were neglecting and, on occasion, exploiting.
Nearly two decades later, he worries that T-Mobile’s $26.5 billion offer for Sprint, which now owns Boost in the U.S., is the beginning of the end for the brand as well as for MetroPCS, a key rival in the market for pre-paid services often used by people who lack the credit needed for traditional mobile services. That would mean escalating prices for some 30 million Americans who can least afford them.
“It would be an absolutely huge mistake if the Federal Communications Commission and the Department of Justice gave a green light to this, and the administration gave a green light to this, because if we’re pro-consumer — which is what we all should be in business — this is definitely not pro-consumer,” Adderton said in an interview with the Washington Examiner.
Boost, whose U.S. operations were taken over by Nextel Communications before its purchase by Sprint, and MetroPCS, which is owned by T-Mobile, join Sprint’s Virgin Mobile USA in commanding about 40 percent of the prepaid mobile-phone market, according to Adderton.
If all three brands are brought under a single company, competition that has driven down rates in the industry will fade away, harming not only consumers but a network of as many as 20,000 independent wireless dealers, some of whom will go out of business altogether, said Adderton, who has detailed the risks on the website all4price.com, a riff on T-Mobile’s deal-promotion site, allfor5g.com.
To prevent that, Adderton says the government should force Sprint and T-Mobile to sell both the Boost and MetroPCS brands before green-lighting the deal. It’s the kind of solution that might appeal to Makan Delrahim, the assistant attorney general who heads the Justice Department’s antitrust division and has argued for so-called structural remedies like asset sales when corporate mergers pose anticompetitive concerns.
“If you’re going to do it,” Adderton said, “just make sure that you do it right and you give protection to the consumers, because you have one shot at this.”
T-Mobile and Sprint, which have promised the merger would increase jobs and speed development of faster, higher-capacity fifth-generation wireless networks, said they wouldn’t decide what to do with the Boost and MetroPCS brands until the deal is completed.
Adderton believes what happens next is a foregone conclusion: “I understand how carriers operate and what they’re trying to do here,” he said. “They’re trying to make this a non-issue that they’ll deal with at the close of the merger, and then you’ll just see these brands go away and prices go up.”
He hopes to share his concerns with members of Congress when the antitrust panel of the Senate Judiciary Committee, which has noted reservations about the transaction, holds a June 27 hearing on it.
“Few industries touch Americans’ daily lives as much as the wireless market,” said Sen. Mike Lee, the Utah Republican who chairs the antitrust subcommittee. “I want to make sure that the proposed merger between T-Mobile and Sprint benefits consumers in a manner consistent with existing antitrust law.”
Competition between the four major U.S. carriers — AT&T, Verizon, T-Mobile and Sprint — has driven down prices and improved service quality, and a combination of two of the companies would weaken that rivalry and slow both trends, added Sen. Amy Klobuchar, the highest-ranking Democrat on the subcommittee.
While each of those companies owns its networks, Boost, MetroPCS and Virgin are mobile virtual network operators, who lease capacity from the major firms and sell it to a smaller niche of the market.
“When I launched Boost in America, we had five carriers,” Adderton said. “We’re going to be down to three, so it’s still going in the wrong direction,” but unleashing Boost and MetroPCS will limit the damage, he said.
While supporters of consolidation sometimes cite Germany and Italy as markets where low prices have persisted with only three carriers, both nations have very aggressive virtual network operators, Adderton said.
“Those guys are extremely competitive,” he said. “They’re the ones that create the dynamic of the marketplace.”
His concerns about the prepaid market are a microcosm of the broader obstacles facing the deal, which both Sprint and T-Mobile have been optimistic that regulators would approve. Investors have been skeptical from the outset: In the month after the merger was announced, Sprint shares tumbled more than 20 percent. Their early June price of $5.22 was 21 percent lower than T-Mobile’s offer.
There’s good reason to worry, according to antitrust lawyers, consumer advocates and stock analysts.
While non-traditional providers have stretched the mobile communications market, their customer base is a fraction of those held by dominant players such as AT&T and Verizon. Additionally, two of the companies — Altice and Comcast’s Xfinity — are also virtual operators that sell services powered by Sprint and Verizon, respectively.
Though Comcast netted more new subscribers last year than AT&T and Verizon combined, its 577,000 subscribers as of late April are dwarfed by AT&T’s base of 156.7 million and Verizon’s of 116.3 million. T-Mobile comes in third, with 72.6 million subscribers, while Sprint has 59.7 million.
While the claim by Sprint and T-Mobile that the combined company can deploy 5G technology more rapidly may impress President Trump — who cited America’s competitive edge there as one of the main reasons for blocking Singapore-based Broadcom’s attempt to take over Qualcomm — and the FCC, which considers consumer benefits in evaluating mergers, it’s unlikely to influence the Justice Department.
Attorneys there focus on anti-competitive issues, largely assessed through the prism of price.
“It’s not right to go from four to three and think that prices are going to go down,” Adderton said. “It just doesn’t work that way.”
