WASHINGTON/NEW YORK (Reuters) – Concessions made by T-Mobile US Inc to win the AMERICAN government approval to buy Sprint Corp will likely lead to higher prices for the poorest Americans, many of whom use prepaid wireless plans, analysts and activists said.
The more expensive prepaid plans, used by people who are not good credit in order to qualify for a cheaper postpaid plan means that people with a low income will have less access to the internet for job hunting and job applications, and for children to do homework, activists say. With postpaid, people pay with credit card or monthly bank withdrawals.
Costs matters. Pew Research Center found in 2015 that 48% of the people they surveyed had to cancel, or shut down their mobile phone service for at least a short time, because they could not afford.
T-Mobile and Sprint said on Monday it would sell Sprint, Boost Mobile business, which sells prepaid plans, and ensure that the transferred company has access to a wireless network for six years.
The offer was enough for the Federal Communications Commission Chairman Ajit Pai to agree to the support of the proposed transaction, ” he said Monday. The two other Republican committee members indicated that they would also back the deal, making the necessary three votes of the five.
The U.S. Department of Justice, the antitrust division staff has recommended that the agency block the deal, leave the decision to political appointments.
Free Press, an advocacy group, urged the Department of Justice to block the acquisition, saying it will worsen an existing “affordability crisis” that makes it difficult for the poorer people get online, said the general counsel, Matt Wood.
“The people who rely on the prepaid services will not see any benefits of the terms and conditions of the FCC is touting.”
Sprint and T-Mobile customers were likely to see weighted-average prices to rise a minimum of 4.2% for prepaid services and 4.8% for post-paid, satellite-tv provider Dish Network Corp, a critic of the deal, said in a FCC filing last year. Currently, Boost provides four lines with unlimited data, talk and text for $100 per month.
Prepaid is often favored by poor people because there is no need for a credit check.
Sale Boost Mobile, one of the three brands that Sprint uses to provide prepaid wireless service, will do little to bring down of market concentration in that market, said Craig Moffett, an analyst at MoffettNathanson LLC.
Moffett puts T-Mobile prepaid market share of 41% and Sprint at 17%, making them 58% if they merge without disposals. It is not known how much of the Sprint is the market share comes from Boost.
Boost would fall back on the combined company to provide spectrum access to the network for at least six years.
Boost uses Sprint’s spectrum and network. Under the companies ‘ proposal, only the brand will be sold and will always remain dependent on the Sprint for the spectrum and the access to the network.
As the spectrum to support Boost has been disposed of, “which would then qualify (Boost) as a real competitor and not depend on someone else’s network,” said Roger Entner, a telecommunications analyst with Recon Analytics.
Entner argued that a Boost has seen better days.
“Boost recently lost their distribution at Target and Best Buy, is to recreate the way it sells wireless. A large part of the increase of the benefit is either falling away or changing the way they do business, none of which are good signs for the Boost,” he added.
Sprint would retain his Sprint-brand prepaid business and the Virgin Mobile, another prepaid brand. T-Mobile would keep Metro, the prepaid business.
Sprint prepaid subscriber base was shrinking, but turned around and has been growing for more than two years, with a Boost to expanding and Virgin Mobile to lose subscribers, according to the Sprint submitted to the government.
A T-Mobile store is pictured in the borough of Manhattan of New York, New York, united states, May 20, 2019. REUTERS/Carlo Allegri
Despite the Boost in sales, the activist group Public Knowledge said the poor would pay more, especially after T-Mobile’s 6-year commitment to Promote expires.
“The low-income and pre-paid consumers to the lower cost (providers) will probably be forced to pay higher prices post-merger as a combination of a T-Mobile/Sprint exercise their market power to increase wholesale prices,” the group said in a statement.
Sprint shares fell by nearly 9% to $6.58, while T-Mobile decreased by 1.2% to € 76.21.
Reporting by Diane Bartz in Washington and Sheila Dang in New York; Editing by Chris Sanders and Jeffrey Benkoe