WASHINGTON, April 23 (Reuters) - Competition is the “watchword” when the U.S. telecom regulator reviews any industry proposals, the Federal Communications Commission’s chairman said on Wednesday, addressing claims that Sprint Corp and T-Mobile US Inc would fail without a merger.
Sprint’s parent, SoftBank Corp, and its activist chief executive, Masayoshi Son, have been waging an aggressive campaign to buy T-Mobile. Investors are closely watching for a possible merger, and how it might affect the two larger carriers, Verizon Communications Inc and AT&T Inc .
In an April 10 research note, New Street Research analysts said Sprint and T-Mobile “are not both independently viable,” citing a shortage of revenue to cover fixed costs.
FCC Chairman Tom Wheeler said “one of the interesting things I’ve learned on various sides of this dais is that there is always research that says, ‘Well, here’s this’ or ‘This could happen.'”
“We’re interested in making sure that ‘competition, competition, competition’ is the watchword in industries over which we have responsibility. And we’ll focus on that like a laser beam.”
Wheeler was speaking after the FCC’s monthly meeting to reporters, who asked if he was concerned that Sprint or T-Mobile might fail without a merger.
Wheeler and William Baer, who heads the antitrust division at the U.S. Department of Justice, have publicly indicated their disinclination to allow the U.S. wireless market to shrink from four major competitors to three.
“What we are trying to do is make sure that there’s sufficient spectrum so that there can be sufficient competition,” Wheeler said when asked whether he considered the U.S. wireless market competitive.
“This is a dynamic process; things change over time. And we believe that what is extant in the market today in terms of four major competitors is an important and driving force in the competitive nature of that market.”
Paul Gallant, analyst with Washington-based Guggenheim Securities, said in a note that Wheeler’s comments were incrementally negative for the prospects of a potential merger between Sprint and T-Mobile.
“Based on Mr. Wheeler’s direct comments today, there appears to be no softening in the FCC’s position - and that a Sprint/T-Mobile merger likely would be rejected by regulators if it were proposed,” Gallant said in the note.
T-Mobile shares closed 3.8 percent lower at $29.81, and Sprint fell 2.6 percent to $8.37, both on the New York Stock Exchange.
Reporting by Alina Selyukh; Editing by Richard Chang