On Friday, UScellular (and its parent company Telephone and Data Systems) announced it was exploring a sale of the cellular company, Inside Towers reported. That caused the stock to jump and raised questions about whether any potential buyers would face a risk of a government rejection, particularly given the views of antitrust authorities and the result in the last major acquisition to face an FCC review.
In preliminary thoughts about the news from New Street Research, Policy Advisor Blair Levin says there’s no doubt any entity other than AT&T, Verizon and T-Mobile would easily win government approval. NSR doubts whether DISH or cable companies would be interested, because it seems “inconsistent” with their approach to building their mobile business.
While NSR believes AT&T, Verizon and T-Mobile would win government approval of a UScellular/TDS acquisition, there would likely be “a second request” for information. “Given the current antitrust leadership, the odds don’t reach the high level of certainty that they would have in a prior time,” writes Levin in a client report.
Antitrust regulators would look at whether a deal is likely to lessen competition in a geographic or product market. While cable has gained market share since the last major mobile services acquisition, it’s unlikely to be included in the product market definition because cable isn’t a facilities-based mobile provider, notes NSR. However, if antitrust authorities decide cable should be included, a UScellular deal becomes “very easy” to okay, notes Levin.
The same holds true if DISH is included in the antitrust analysis because “DISH has been building out its facilities based mobile competitor,” asserts the policy expert.
“We think the analysis from a national geographic market perspective will demonstrate that UScellular is not large enough to shift the current competitive dynamics, even if the government doesn’t include DISH and cable in the calculus,” writes Levin. If this holds, the deal is easier to approve, NSR believes.
However, the antitrust analysis from a local market lens is more problematic. While there may be places where UScellular’s position, either in market share or spectrum, may be more significant, NSR still doesn’t believe getting regulatory approval will be an issue. “Prices are set nationally so the transaction is unlikely to affect prices in a local market. Further, if there is a problem in a local market, the divestiture of spectrum and/or customers to another provider would likely address that problem,” says Levin.
Concerns the researchers have heard from analysts about the approach of antitrust authorities at the DoJ or the FTC are understandable, but they probably won’t lead to any deal being rejected based on past practices relating to past transactions, NSR believes. The same is true at the FCC, though researchers think the agency could use any deal to win concessions on conditions, according to Levin. The economic impacts of such conditions “are generally not material to investors,” he notes.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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