Justice Department staff trys to block a potential T-M-S deal

When Sprint and T-Mobile bring theirexpected merger plans to the U.S. Department of Justice for antitrust review,the career staff who do the bulk of the probe into whether the deal will hurtcustomers will likely recommend that it be stopped, three people familiar withtheir thinking told Reuters.

The deal between the U.S. third- andfourth-largest U.S. wireless carriers, likely to be announced later this month,is set to test how antitrust enforcers will approach big deals under theadministration of President Donald Trump, who is seen as pro-business but alsoran a populist campaign aimed at the worries of ordinary Americans.

The Justice Department's main concern ishow the deal would affect competition in the U.S. mobile sector. Antitruststaff will want to let T-Mobile continue as it has done, aggressively wooingcustomers away from market leaders Verizon Communications Inc and AT&T Inc, the people said.

T-Mobile touts itself as thefastest-growing U.S. wireless company, and its annual report lists enticementsto attract customers like paying termination fees for new customers who leavetheir old company.

If combined, T-Mobile U.S. Inc and SprintCorp would have more than half the market for pre-paid plans, favored by peoplewith little or poor credit, which will likely figure in competitionconsiderations.

"Losing that head-to-head competitioncould drive up prices for those on a more limited income," said GeneKimmelman, president of Public Knowledge, a consumer advocacy group.

Sprint and T-Mobile agreed on tentativeterms on a plan to merge in late September, sources said.

But it is not clear the deal will be anymore successful than three years ago, when Japan's SoftBank Group Corp , whichcontrols Sprint, abandoned talks to acquire T-Mobile for Sprint in the face ofopposition from U.S. antitrust regulators.

An informal poll of seven antitrust expertscontacted by Reuters found them split between predicting that the deal would bestopped and saying they did not know if it would be allowed. A tiny fraction ofdeals are blocked.

As influential as the career staff is, thefinal decision will lie with Trump's antitrust enforcer at the JusticeDepartment, Makan Delrahim, and the Federal Communications Commission.

Deutsche Bank analysts said in a researchnote this week they were "very bearish on the prospects for deal approval,"citing not only regulatory risk, but also political opposition from Democratsto deals that could threaten U.S. consumers.

If the agencies decide to try to stop themerger, they have ammunition.

The U.S. wireless market is dominated byVerizon with about 146 million wireless customers and AT&T with nearly 135million. T-Mobile is third with 71.5 million and Sprint is No. 4 with 58.5million, according to Fierce Wireless, which collects and analyzes wirelessmarket data. Together, the four have 98.8 percent of the U.S. wireless market.

T-Mobile dominates the prepaid market.Combining with Sprint would give it 56 percent of the market to providewireless to people who tend to be poorer or have no or bad credit, according toJohn Fletcher, an analyst with S&P Global.

One point in the deal's favor is that themobile market is competitive. Between August 2016 and August 2017, wirelesstelephone services prices fell a stunning 13.2 percent, according to the U.S.Bureau of Labor Statistics.

"Chances are better now, meaningfullybetter," that the deal will win approval, said Daniel Bitton, an antitrustattorney with Axinn, Veltrop and Harkrider.

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