Texts Show DOJ Effort to Enlist Senators in T-Mobile Deal

Erik Larson

(Bloomberg) -- The Justice Department’s antitrust chief tried to get U.S. senators enlisted to lobby an independent regulator to approve the $26.5 billion merger of Sprint Corp. and T-Mobile US Inc., according to text messages presented as evidence by states seeking to block the deal.

Makan Delrahim, who heads the department’s antitrust division, wanted senators to contact Ajit Pai, chairman of the Federal Communications Commission, to discuss the merger as questions lingered about whether the deal would win approval, a judge heard Wednesday at a trial of the states’ antitrust lawsuit.

The revelation in Manhattan federal court came from the disclosure of text massages between Delrahim and Dish Network Corp. Chairman Charlie Ergen, who was on the witness stand. The satellite-TV provider’s plan to buy assets from T-Mobile and Sprint is a crucial element of the merger agreement.

“Today would be a good day to have your Senator friends contact the chairman,” Delrahim said in the text to Ergen on June 10, one day before the states sued to block the deal.

The DOJ approved the proposed combination in July, and the FCC followed suit in October. The merger was blessed in part because T-Mobile and Sprint agreed to sell some assets that Englewood, Colorado-based Dish would use to create a new wireless phone company to compete with the merged company and market leaders Verizon Communications Inc. and AT&T Inc.

Transparency Issues

“The antitrust division is proud of its work in reviewing this important merger on behalf of the American consumer,” the department said in response to questions about the text messages.

Some Democratic lawmakers have expressed concern that the approval process wasn’t transparent and that the FCC had altered an antitrust analysis to downplay competitive harms from the merger.

Tina Pelkey, an FCC spokeswoman, declined to comment.

According to other text messages submitted as evidence at the trial, Ergen confirmed to Delrahim that he had made the calls to lawmakers, including Senate Majority Leader Mitch McConnell, a Republican.

Under questioning by a lawyer for the states, Ergen said Wednesday he discussed the merger with McConnell but didn’t ask him to contact Pai. Ergen said he asked Republican Colorado Senator Cory Gardner to call Pai because he knows the commissioner.

Attorneys general from a dozen states and the District of Columbia claim the merger will reduce competition and raise prices by removing Sprint as the nation’s scrappy low-cost carrier.

Personal Email

Evidence presented by the states also showed that Delrahim texted his personal email address to Ergen after they began discussing the merger.

“You don’t have any idea why he was giving you his personal email address, do you?” Paula Blizzard, a lawyer for the states, asked Ergen.

“I do not,” he responded, adding that he wasn’t aware of any effort to keep discussions of the deal off of Delrahim’s Justice Department email.

Ergen testified that Dish’s initial conclusion about the proposed merger was that it would cause prices to go up for consumers and make it harder for Dish to enter the wireless business. That prompted a question from the judge.

“But implicit in that is that the status quo was OK,” the judge said. “In other words, you had four competitors, and you didn’t want it to reduce to three by getting rid of Sprint, so essentially if the status quo remained, would you have been OK with that?”

“We would have been OK because we wouldn’t have had a merger in that situation,” Ergen responded. “So I think we would be OK.”

Ready to Compete

During testimony on Tuesday, Ergen said Dish is ready to compete with the biggest U.S. wireless carriers “from day one” after the merger.

Blizzard sought to undermine that assertion on Wednesday by presenting evidence that Dish had previously failed to follow through on various commitments to the FCC, including backing away from plans to launch new satellites after securing licenses for them.

Ergen agreed that the FCC had criticized Dish over those failures but said the company had never missed a deadline on the sort of land-based infrastructure that would be most relevant to Dish’s plans to become a wireless carrier.

The executive also testified that Dish had discussions to get indirect financing from Sprint’s controlling owner, the Tokyo-based technology conglomerate SoftBank Group Corp. Ergen said Dish would save as much as $100 million through such a transaction due to SoftBank’s relationship with JPMorgan Chase & Co.

“We haven’t had those discussions recently,” Ergen said. The Justice Department signed off on such financing, he said.

(Updates with FCC’s declining to comment)

--With assistance from Todd Shields and David McLaughlin.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Steve Stroth, Peter Jeffrey

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