PERILS OF PREPAY
Gouge fear said to drive T-Mobile tieup probe
New York’s Attorney General is stepping up its probe into T-Mobile’s proposed merger with Sprint, concerned that the wireless giants could hike prices on cheaper prepaid services if they combined, sources told The Post.
New York AG Barbara Underwood launched the investigation just weeks after T-Mobile and Sprint proposed their $27 billion tieup in April, sources said, reaching out to executives at companies that provide similar pay-as-you-go wireless services with questions about customers and pricing.
Underwood’s office is concerned that T-Mobile’s MetroPCS service and Sprint’s Boost and Virgin Mobile services are among the US’s most aggressive when it comes to price, insiders said. Putting them under a single roof could send rates higher — and possibly out of reach for some customers, critics say.
In turn, sources say Underwood is beefing up her antitrust staff as her office eyes the merger. Last week, the Federal Communications Commission revealed in a public notice that Underwood’s office issued a subpoena to the FCC seeking all materials T-Mobile has submitted since announcing the merger.
New York intends to share
those materials with other state attorneys general that are investigating the merger, according to the FCC notice.
President Trump’s US Department of Justice has just started its review of the prepaid markets as part of its merger review and has not made any conclusions, even
preliminarily, a source familiar with its thinking said.
Officials at the New York AG and the DOJ declined to comment.
Executives at T-Mobile, headed by CEO John Legere, told federal regulators in August that their MetroPCS service — which has nearly 21
million customers, a 27 percent share of the prepaid wireless market, according to SNL Kagan — served a different customer than Sprint’s Boost and Virgin Mobile services, which have a combined share of 12 percent.
As such, T-Mobile told the Federal Communications
Commission in an Aug. 30 letter that it didn’t plan to dispose of or consolidate any of the lower-priced, prepaid services if its $27 billion tieup with Sprint gets approved.
“The business plan calls for aggressive pricing from day one,” T-Mobile execs insisted.
Some critics say it’s not enough. They want assurances that millions of customers who depend on prepaid wireless services won’t see their costs creep up. Many can’t pass a credit check for long-term wireless plans, says Gaurav Laroia, policy counsel at Free Press, a DC-based media watchdog.
“This is an incredibly important issue,” Laroia said. “Not having a phone has serious employment implications.”
Insiders say the prepaid market has emerged as a stumbling block for T-Mobile and Sprint — possibly more so than their far-bigger business that depends on longer-term contracts. While a combined T-Mobile and Sprint would still be No. 3 in the US behind Verizon and A&T overall, their prepaid business would vault to No. 1.
Currently, Tracfone, owned by Mexican billionaire Carlos Slim, is the market leader, edging out MetroPCS with a 29 percent share.
AT&T’s pay-as-you-go service, Cricket, has a 21 percent market share, while Verizon has only a 6 percent share, according to SNL Kagan.