Sprint T-Mobile Deal Still Faces Regulatory Challenges

that many analysts say will never happen. John Ledger, CEO of T Mobile, has been promoting the deal. He explained why he thinks the deal will go through on Bloomberg. It's not four to three, come on this, seven or eight chem wireless players now, charters coming in anytime soon. Secondly, more important, here's my headline. It's zero to one. There's nobody doing five g We're going to be the first.

That's what the country should think about joining me. Is Bloomberg Intelligent Senior Lytic Asian analyst Jennifer Rey so Jen Mega deals worth ten billion or more are more than twice as likely to fail as mid sized deals between one billion and ten billion according to Bloomberg Laws M and a market update, and this deal faces scrutiny from several government agencies, which should be the hardest hurdle. I think in this case it's probably the Department of Justice.

I think ordinarily when the deals in front of both the Department of Justice and the Federal Communications Commission, you would say the Federal Communications Commission. But in this case you have a situation where their standard when they look at this is a little bit looser, a little more

subjective than the Department of Justice is standard. And I think that if they want to win this deal, T Mobile and Sprint are going to have to do it on this five G issue, this innovation issue, and the FCC can look at that and say, is it in the public interest, you know, in this five G world and for innovation in the future, for these companies to

come together and say, yes, it is. The Department of Justice has much more rigid standards by which they can credit that kind of innovation sort of weigh it against the possible anti competitive effects of reducing from four to three. So the company seemed to be well aware of the specific hurdles no matter what Ledger is preaching to the masses, because they had built contingencies into the agreement and they covered divestitures, national security conditions, and regulatory review. What stands

out to you there? You know what stands out to me the most? I think there are two things. One is the lack of an antitrust breakup fee. I found that to be really unbelievable because for any big deal that has a lot of uncertainty, and I think everybody would agree, including the companies, that this does, there is usually a breakup fee that's meant to protect the seller after a year of investigation, their business can suffer, and

that fee can help make them whole. So that was surprising to me, and also a little surprising was this recognition, I mean not surprising, but interesting I think was the recognition of the change in Sciphias because both of these companies, remember Deutsche Telecom and soft Bank that owned the companies

already years ago, god Syphia's clearance to acquire American wireless companies. Siphius, of course, being the commission that investigates deals having to do with foreign countries and has been rather very busy lately, shows Yes, so there is a lot of interesting deal activity to keep you busy. Gin Disney's working through its deal to buy some of Fox's stellar entertainment assets, and

now Comcast is getting into that picture. Again, explains right, there are reports that Comcast might get into it, and I think what happened here is that this is all very contingent on what will happen and the judges ruling on the on the Justice Department's lawsuit trying to block a ten time Time Warners merger. We expect that decision June twelve. And what happened there was that the Department

of Justice sued to block that deal. It is a vertical deal, not a horizontal deal, not a deal between competitors, because they were concerned about what owning that content would allow A. T and T as a distributor to do to other rival distributors. And that happened. Comcast originally was interested, you know, about a year ago or sometime in the

last year. Comcast was interested in these Fox assets, but they would have had the exact same issue that A. T and T had an acquiring Time Warner, and so I think Fox was concerned about that and they saw Disney as the better buyer from an antitrust risk perspective. But now there's a lot of speculation that a T and T and Time Warner might actually win that trial. And if they do, what has been reported is that Comcast is going to jump back in because now their

antitrust risk is likely lowered. And explain that deal. What that deal encompasses. The deal with the Fox and ABC. Well, Fox is selling only some of its assets, so it's selling regional sports networks but not its national sports net networks. It's a movie studio, and then it's Steak in Hulu and it does own of Sky, which is a UK company, and that Steak will go to um other assets. It's

keeping itself other networks and tell of Asian stations. Uh So the overlap for Disney, you know, it's a horizontal overlap. It's two competitors. They both have movie studios. Disney of course has ESPN and so there may be some overlap there in the sports programming and the sports content. And then Disney would up its Steak and Hulu because it already has some Steak and Hulu. So and it would be the same with Comcast. You would also have some

horizontal overlap. With Comcast, which also has programming. So these will change the entertainment landscape. And as you mentioned, speculation is high on the side that the judge will actually allow that deal to go through. Is are people being too confident about that? You know, I saw quite a bit of the trial, and what a lot of what I didn't see. I read the transcripts of those days

and you're a brave woman. It was really interesting. And then the antitrust world, it's very exciting because we haven't had a trial like this in a long time. Vertical deals usually are able to get cleared or get cleared with some conditions on conduct going forward. And I would be very, very surprised if the judge ruled for the

Department of Justice in this case. You know, they have a burden of showing that the deal has a likelihood of substantial harm to competition post merger, and it just I think they had a difficult time proving that they didn't have a lot of strong evidence, and the economic model wasn't strong and I think was very attenuated. Um, And it's a lot to rest blocking a deal on the kind of evidence that they provided a trial. So I think most people who observed it are along. I

think that way too. So let's say that the judge does allow the deal to go through. What kind of effect will that have on the marketplace, on the landscape of the entertainment industry, and also on the way the Justice Department decides whether to oppose new mergers. Well, certainly some of that depends on what the judge does and what that what the opinion, how narrow or how broad it is, what the judge says about vertical deals. But certainly it move some of the risk for other vertical deals.

So if there are deals that we don't know about in the making right now that had concerns because they were vertical rather than horizontal deals and thought that that might be a problem, they might feel free to move forward. And certainly, as we see you've got Comcast already talking about jumping back in, I think it will be a little bit more deal activity, particularly in media, as a lot of these companies try to compete with Netflix and Amazon Prime and some of these other over the top

they're called options. And so the Justice Department in about a minute, this is a big question. For a minute, the Justice Department will just have to give in or you think it still might oppose some of these deals and try to work on it. Oh, they still can oppose, you know, the deal. They look at it one by one. Each one is unique for the facts that apply to those companies. So I don't think that they'll give in. And I actually also think in a teen t skates

if they lose, they'll appeal. That was going to be my next question, but we have about half a half a minute left. Thanks so much, Jen, Always a pleasure to have you. And that's Bloomberg Intelligence Senior litigation analyst Jennifer Ree. And you can read more of our analysis by going to b I go on the Big Work Terminal. RBS says it's paying four ft nine billion dollars to resolve the Jostice Department's investigation into its sale of toxic

mortgage backed securities a decade ago. The number is good news for banks like HSBC, UBS and Wells Fargo because the RBS penalty will be about half what many analysts had expected the bank to pay. Joining me as Robert Hocket, professor at Cornell Law School, Bob, the NBS portfolio of RBS was larger than that of most banks. Does this settlement surprise you. It does in a way, June. In

another way I probably shouldn't. Uh. The sense in which she does is and of course it's much much lower, sort of on a per per unit basis, you might say, than we're the fines that we're levied against most of the big banks that were successfully prosecuted or investigated during the Obama administration. And so in that sense, it looks like those who are sort of process scuted later are getting a bit of a windfall, right, Uh. And that

is in a sense of surprising. Right. The sensing which it's not surprising is that there has been, of course disturbing There have been disturbing development, you might say, over the last year or so. Um. That basically indicate that when Mr Trump was sort of running as a so called populist who was uh, you know, kind of pro main street or a pro industry, but maybe down on Wall Street. Um, that those uh should I call them where they promised us? I mean, if those assertions were surances,

we're basically you know, meaningless. So let's let's let's talk about the and compare it to the Obama administration by explaining what happened to Barkley's at the end of the Obama administration and then at the beginning of the Trump administration. Yeah, so of course there was an announcement, um, you know, the towards the end of the Obama years, right, that

a particular settlement amount. I'm sure that in particular, uh, well, that the administration might be seeking a rather large penalty, right, Barkley announces defiantly, Barkley's, I should say, and now is defiantly that it will not pay more than a certain amount to billion. I believe it was, um. And so

the Obama administration goes ahead and prosecute anyway. Uh. And then of course, here we are at the beginning of the Trump administration, and when we reach the end of the case, um Markley's ends up paying no more than the two billion that they said that they would be willing to pay. So now, as a policy shift, in a speech on Wednesday, Deputy A. G. Rod Rosen sign talked about companies over paying for their crimes because of

piling on by multiple government agencies. What was the new policy he announced, Well, he's essentially announced that he wants the various regulatory agencies to sort of work together to arrive at sort of a common amount when it comes to how much is going to be fined. But there's sort of two different ways to read that. Right, on the one hand, the you know, saying that referring to this is sort of piling on, and also saying that, you know, in consequence of the SoCal piling on, these

firms might be paying too much. That's one way of reading things, and that's the read. If that's the property, that an absurd. Right on the other hand, if the idea is that well, there ought to be coordination between distinct regulators who are regulating and assessing finds, then I think nobody would contest that, right. I think everybody would

be flying with that. The reason that the first read looks like the more likely one is precisely because he seems to be using a lot of language, like the piling on language and the paying too much language, to suggest that that's what actually bothers him. And the thing that's preposterous about that, of course, is, as anybody will tell you, if you look at the amount of damage or the amount of harm done, the sort of dollar value of the harm done in the lead up to

the crash, the findes that have ultimately been levied. Even the highest fines are in the Obama administrations have been administration have been laughed at as having been paltry in comparison to the gains that were that were made through the wrongdoing. Right. So, in other words, even the so called heavy or large OBOA findes are just looked at as sort of business expenses by the banks in question. And for that very reason, many people are saying, you

really have to go with individuals and jail. Then the finding isn't working. So for reasons trying to come up and say, well, the fines are too highs so much filing on that's just crazy. So Bob, though, if these fines aren't working, and that seems to be the indication from the behavior we've seen, is there something to be said for a less punitive approach to enforcement and spending

less money on it. I think that the answers that fines aren't working, right, that's not a sign that we're sort of doing too much or that finding just doesn't work at all, or the prosecution doesn't work. It does suggest that we're finding maybe some accept the wrong entities

or we're not finding enough entities. Um and most people who have been watching this carefully or saying that, look, we ought to go after the individuals themselves who make actual decisions, and that would mean finding individuals, not firms, or individuals in addition to firms, and it would mean even possibly prohibiting people from the industry or uh even jail time if people's crimes are severe enough. Bob, So is it time for the banks to breathe a sigh

of relief? Well, uh, it's looking that way. I mean, it is definitely looking as though that Trump has been sustration is not going to be serious about law enforcement against large financial institutions and the So the Wells Fargo Fund was just um an isolated incident. Yeah, I think in a way that was essentially a way for it's

philics just looking this way. To me, now, the best interpretation I can put on it now is that this was a way for Mr Mulvaaney to say, you see, I'm not getting lacked in my sort of illegal occupation of the CFPB. I'm actually quite severe. I'm very hard on the banks. But it was just it was sort of a one off deal. And of course this all comes at the same time as announcement that the various

other enforcement actions are being dropped. They're not going to pursue um exploitation or fraud by poor profit education institutions like Trump University, that they're not going to bother going out to pay the lenders. I mean, that's I think what is more telling than a single isolated UH fine that was imposed, that was already in the work before he came along, uh and that now looks again just like a kind of window dressing to give him at

least one on arrow in the quiver. And when he's trying to defend himself, he gets claims that he's not actually taking the role of the CFTP. Seriously. Thank you, Bob. That's Robert Hockett. He's a professor at Cornell Law School. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple podcast, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brosso. This is Bloomberg