* Planned spectrum auction rules could crimp big carriers
* Proposed deal would merge Nos. 3-4 U.S. wireless carriers
* A tie-up would reshape wireless sector
(New throughout, adds closing share price, background on
By Alina Selyukh
WASHINGTON, April 17 A possible merger between
Sprint Corp and T-Mobile US Inc could prompt U.S.
regulators to rewrite rules they are now weighing for a 2015
auction of airwaves, according to sources familiar with the
Sprint's parent company has been exploring a possible tie-up
with T-Mobile, although no proposal has been announced. Federal
Communications Commission Chairman Tom Wheeler has proposed
restrictions on how much the biggest carriers, Verizon
Communications Inc and AT&T Inc, could bid in the
major auction of television spectrum scheduled for mid-2015.
The auction offers carriers a chance to buy access to
airwaves that are valued for their strength and reach.
Wheeler's proposal has yet to be formally circulated among
other FCC commissioners but would reserve up to 30 megahertz of
spectrum in each market for carriers who do not already dominate
the lower frequencies there - in most cases, Verizon and AT&T.
However, as in many other proceedings, the FCC's rules would
be based on the "current market structure." Any changes or
proposed changes in that structure that could undermine the
goals of the auction would prompt a review and potential edits,
said sources briefed on the proposed rules.
That means if Japan's SoftBank Corp, Sprint's
parent company, forges ahead with its goal of merging the No. 3
wireless carrier with No. 4 provider T-Mobile, the FCC could
eliminate the reserve set off for smaller competitors, sources
Some regulators, including Wheeler, have been skeptical of a
potential merger because it would reduce the number of major
U.S. wireless carriers to three from four. SoftBank CEO
Masayoshi Son has argued that a stronger third player would
create more competition for AT&T and Verizon.
FCC commissioners will review the draft rules in coming
weeks and are expected to propose them on May 15. Bigger
competitors have pushed back against bidding restrictions and
AT&T on Wednesday threatened to boycott the auction if the rules
are adopted as proposed.
U.S. regulators have expressed skepticism about the proposed
Sprint/T-Mobile deal, but SoftBank CEO Masayoshi Son has made no
secret of his goal to acquire the smaller carrier to become a
stronger force in the United States and ultimately build the
world's biggest mobile-related corporation.
It is unclear how active Sprint plans to be in the 2015
auction, particularly if the FCC were to reconsider how it may
calculate Sprint's spectrum holdings in evaluating any new
The FCC reviews purchases of airwaves if the buyer acquires
more than one-third of spectrum deemed suitable for wireless
service in that area. In the past, large chunks of Sprint's
higher-frequency airwaves were considered unfit for wireless.
The proposed changes would expand the scope of what spectrum
is deemed fit for wireless, affecting particularly the holdings
of Sprint and satellite provider Dish Network Corp.
Some analysts have said the expanded "spectrum screen" may
force Sprint to divest some of its airwaves if it merges with
T-Mobile or buys a lot in the auction.
However, that "spectrum screen" is flexible and does not
mean the FCC would necessarily reject any deals that exceed the
one-third threshold. And supporters of the merger have argued
that if the FCC determines the Sprint-T-Mobile deal is in the
public interest, the agency would be unlikely to force
divestitures of the very spectrum that would make the merged
company a stronger competitor to AT&T and Verizon.
Sprint closed at $8.52 on the New York Stock Exchange on
Thursday, up 1.8 percent. T-Mobile closed at $30.40, up 2.2
(Editing by Ros Krasny, Matthew Lewis and David Gregorio)