Election-Year Opportunities For Wireless M&As?
Given the mixed outlook for scarce spectrum in the face of growing consumer/enterprise wireless-data demand accompanying increased adoption of smartphones, tablets, e-readers and other spectrum-dependent/Web-connected devices, the Obama administration could exhibit behavior that, on first blush, appears counter-intuitive in light of the Federal Communications Commission’s (FCC) and U.S. Department of Justice’s (DoJ) successful efforts to force AT&T to abandon its planned $39 billion acquisition of T-Mobile (click here for more information).
Conventional wisdom might suggest telecom/media/tech companies would be willing to wait until after November’s presidential election in hopes a GOP victory would give rise to less antitrust/regulatory risk. Perhaps. But there’s another way to consider the current policy landscape in terms of election-year realpolitik.
FCC Chairman Julius Genachowski and President Obama have made universal broadband and spectrum-reform tech priorities. DISH and wireless-related M&As arguably are among the best near-term options for a wireless industry with continued growth potential at a time when improvement in the sagging economic recovery and attendant job creation could be the president’s ticket to re-election.
Despite the government’s treatment of AT&T/T-Mobile (or perhaps because of it), candidate Obama could be inclined to supplement his populist embrace of initiatives designed to curry favor with the middle class with ancillary signals that his Administration is not nearly so anti-business as claimed by Republicans.
It is worth noting telecom transactions pending and those that may arrive anew at the FCC in 2012 will not face the strict scrutiny of former Democratic Commissioner Michael Copps, the most liberal, pro-consumer member who left the agency late last year. The FCC begins 2012 with a 2-1 Democratic majority as the five-member commission awaits Senate action on nominees Jessica Rosenworcel (D) and Ajit Pai (R).
Given the political dynamics and industry spectrum requirements, we do not believe it inconceivable for government regulatory and antitrust officials to greenlight a series of wireless transactions in the pipeline (Verizon/SpectrumCo, Verizon/Cox, Verizon/Leap, DISH/MSS) and others less offensive than AT&T/T-Mobile that may come policymakers’ way in 2012.
No Time To Wait
Wireless companies may not have the luxury of waiting until after the presidential election to make spectrum plays. Cable spectrum is quickly being spoken for, closing a window on one of only a handful of attractive options on the table; and LightSquared’s future remains cloudy. Sprint recently put its spectrum/networking sharing partnership with LightSquared on hold, pending resolution of interference-related regulatory issues.
DISH could receive regulatory approval this year for its MSS spectrum purchase, making conditions ripe for a transaction. AT&T/T-Mobile, having collapsed under government pressure, established a tangible antitrust ceiling that companies can now navigate to avoid problems encountered by those two companies.
We believe any number of other possible wireless combinations could make it under the Obama antitrust bar, subject in some cases to conditions. In other words, there could be an opportunity cost for companies that await the outcome of November’s presidential race because they believe M&A risk would be significantly diminished in a Republican
administration. Even under such a scenario, some delay would ensue due to transition and wholesale staffing changes requiring, in some cases, Senate confirmation.
While telecom legislation tends to slow in an election year, the same trend may not carry over to telecom M&A in 2012. We may be on the verge of seeing a form of three-dimensional chess put in motion among wireless carriers (AT&T, Verizon, T-Mobile/Deutsche Tekekom, Spring, Leap, Clearwire and U.S. Cellular) seeking to shore up spectrum positions.
This outlook is not so much a contrarian view but rather an attempt to tease out possibilities that may seem unlikely in an election year. Paradoxically, they may be made all the more plausible when considering a confluence of factors that could challenge conventional assumptions.
– Jeffrey Silva is senior policy director/Telecommunications, Media and Technology at Washington, D.C.-based Medley Global Advisors LLC. Contact him at 202/434-0980.
