Analysis: In telecom merger mania, skeptical eye from Obama administration

Tue Dec 24, 2013 1:43pm EST
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By Alina Selyukh and Sinead Carew

WASHINGTON/NEW YORK (Reuters) - A pair of potentially transformative U.S. telecoms and cable deals could run afoul of Obama administration regulators who worry that mergers among market leaders would hurt consumers.

With both cable and mobile phone operators grappling with slowing growth, speculation has intensified recently about potential takeovers of No. 4 wireless service provider T-Mobile US Inc and No. 2 cable service provider Time Warner Cable Inc.

Some possible buyers, including Sprint Corp and Comcast Corp, may face headwinds in convincing U.S. regulators that their deals would improve competition.

"The Obama administration definitely is more skeptical of large corporate combinations... They are concerned about the effects of market concentration on consumers," said Robert McDowell, who stepped down as the senior Republican member of the Federal Communications Commission earlier this year.

"It's not an impossible wall to climb over but it is a high wall nonetheless," said McDowell, now a visiting fellow at the nonprofit Hudson Institute in Washington.

The Obama administration's pro-consumer tack could threaten deals that eliminate big competitors within an industry, such as a Sprint bid for T-Mobile or a Comcast bid for Time Warner Cable. Regulators could, on the other hand, welcome transactions that bolster new entrants, such as one combining satellite TV service provider Dish Network Corp with T-Mobile, experts say.

"Dish/T-Mobile, from a regulatory standpoint, it would be a slam-dunk," said Stifel analyst David Kaut.

All the companies mentioned in this story declined comment.   Continued...

Signage for a T-Mobile store is pictured in downtown Los Angeles, California August 31, 2011. REUTERS/Fred Prouser