FCC Likely Not a Big Obstacle to a Sprint-Charter Combination

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By Kyle Daly (Bloomberg BNA)

A marriage of Sprint Inc. with Charter Communications Inc. would likely be blessed by the Federal Communications Commission without major conditions, agency watchers say.

SoftBank Group Corp. Chairman Masayoshi Son is said to be preparing an offer to buy Charter, according to Bloomberg News. Such a deal would bring the second-largest U.S. cable company and fourth-largest U.S. wireless carrier together under the Japanese company.

Son might have struggled to win FCC approval for that combination in the past. But Republican commission chairman Ajit Pai would probably bless the deal without imposing any major conditions on the companies.

“Given the de-regulatory philosophy of this administration, and this FCC, combined with their publicly stated views on merger conditions, it is unlikely that a cable and wireless combo would give policymakers significant heartburn,” said former Republican FCC Commissioner Robert McDowell, a partner at Cooley LLP in Washington.

Pai has criticized the agency in the past for using merger conditions to advance its regulatory agenda. As a minority commissioner in the Barack Obama administration, Pai offered full or partial dissents from Democrat-controlled FCC merger approvals, including Charter’s acquisition of Time Warner Cable Inc. and AT&T Inc.'s acquisition of DirecTV, because of the conditions imposed.

Now that Pai has the reins, he’s unlikely to take issue with having a major wireless carrier and a major cable company under one corporate umbrella. An FCC spokesman declined to comment.

Pai probably wouldn’t saddle SoftBank with conditions such as net neutrality commitments and prohibitions on sponsored data that the Democrat-controlled FCC imposed on communications mega-mergers under Obama. Pai called those types of conditions “forced tribute that the company must offer to mollify the Capitol” in his partial dissent from the FCC’s 2015 order approving the AT&T-Time Warner deal.

It’s too early to tell what conditions the commission might require to approve a Sprint-Charter deal, but analysts are watching the Department of Justice review of AT&T Inc.'s pending acquisition of Time Warner Inc. for clues.

“We’ll see what type of conditions” the Justice Department sets if it approves the AT&T-Time Warner deal, BTIG analyst Walt Piecyk said. “If that deal is approved with light or no conditions, that’d probably be a decent early signal about how much the current administration is going to be proactive in preventing the increasing size of communications companies.”

To be sure, Pai may go further with Sprint-Charter conditions if he comes to believe that wireless and wired broadband are really one market populated by companies competing for the same customers, Recon Analytics analyst Roger Entner said. That may happen if wireless operators start making demonstrable strides toward building out next-generation 5G networks that offer speeds comparable to those achieved by wireline broadband providers.

“If it’s two markets, then it’s a vertical merger and shouldn’t get a lot of scrutiny. If it’s one market or a linked market, then it gets much more interesting,” Entner said.

To contact the reporter on this story: Kyle Daly in Washington at kdaly@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com (Bloomberg BNA); Crayton Harrison at tharrison5@bloomberg.net (Bloomberg); Robert Fenner (Bloomberg)

[With assistance from Scott Moritz (Bloomberg) and Gerry Smith (Bloomberg)]

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