Revelations over Sprint’s misuse of Lifeline programme could slow approvals yet further, but unlikely to derail deal, analyst says

There will be no imminent announcement from the FCC regarding its formal approval – or otherwise – of the proposed merger between Sprint and T-Mobile US because commissioners are dragging their heels over submitting their final votes on the tie-up, it emerged this week.

The US regulator, whose membership is dominated by Republican commissioners, is expected to vote in favour of the deal. Indeed, FCC chairman Ajit Pai in May said he would back it and fellow Republicans have spoken out in support of it.

However, according to an unnamed source cited by Bloomberg, a three-week deadline period for a decision that kicks in once three commissioners have voted in favour of the the deal has yet to be triggered. Put simply, that means that the commissioners are taking their sweet time over approving the merger.

The newswire explained that the FCC uses an electronic system into which commissioners enter their votes. Pai voted in favour when he sent the deal to commissioners in mid-August, while Michael O’Rielly recently confirmed that he has submitted his vote, without divulging its content, although he has previously indicated he supports the merger. That suggests that the third Republican, Brendan Carr, who has also been open in supporting the deal, has yet to vote.

According to Bloomberg, Carr has been in contact with T-Mobile representatives at least nine times since Pai called for the vote, but there has been little public information on the content of the discussions.

In an added complication, the FCC on Tuesday called for an investigation into Sprint’s conduct with regard to Lifeline, a long-running programme that offers phone service discounts for low-income consumers and forms part of the Universal Service Fund.

According to Pai, Sprint claimed subsidies amounting to tens of millions of dollars for around 885,000 Lifeline customers, even though they were not actually using the service. The figure amounts to 30% of Sprint’s Lifeline customers and 10% of the whole Lifeline programme.

As a result, Democratic commissioner Geoffrey Starks has called on the FCC to pause its review of the Sprint/T-Mobile tie-up until the conclusion of the investigation, noting, amongst other things, that how they would handle Lifeline formed a prominent part of the telcos’ merger pitch.

The revelations are clearly not good news for Sprint or T-Mobile, but industry watchers believe they will not prove fatal to the deal. A Bloomberg analyst predicted that while the Lifeline issue might well slow the approval process, it would be unlikely to cause Republican commissioners to block the merger.