Analyst Says the T-Mobile/Sprint Merger Has an HHI Problem

When the T-Mobile/Sprint merger was announced on April 29, it was immediately met with skepticism, according to Craig Moffett of MoffettNathanson.

“Few pundits have given the deal much more than even odds of approval…our own estimate was, and remains, 50/50,” he said.  “Even last week’s comments from DOJ Antitrust Bureau Chief Makan Delrahim that there is no presumptive requirement for four wireless competitors did little to change the perception that the deal’s prospects are relatively dim.”

But beyond simple pronouncements about whether four-to-three should or shouldn’t be permissible and about whether partisan politics do or don’t favor approval, there has been “precious little serious analysis” of how the DOJ’s decision will likely be made.

“The deal’s HHI (Herfindahl-Hirschman Index, a measure of market concentration), will necessarily play an important role.  We’ve examined the deal’s national retail HHI in the past.  But the HHI analysis that will be undertaken by the DOJ is likely to be much more nuanced,” he said. His company prepared a report that examines the HHI issues facing the merger through a number of different lenses that consider the deal’s national HHI for both the post-paid market and the pre-paid market (the latter is likely to be particularly important for lower income consumers.)  “And, importantly, we consider the HHI of individual local markets,” he said. In addition, we consider the FCC’s spectrum screen at both the national and local level. Our quarterly review of trends reveals genuine improvement at Verizon, which stands in sharp contrast to steady, even if modest, deterioration at AT&T.” For more information on the report click here.

June 8, 2018

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