FTC collusion probe of Verizon-AT&T could halt a T-Mobile purchase of Sprint

A few days ago, we told you that the U.S. Justice Department is looking at possible collusion between Verizon, AT&T and the G.S.M.A. trade group. The three allegedly attempted to develop a way for a carrier to keep a phone locked to its network even with the use of eSIM technology. The latter is embedded in some devices, replacing the standard SIM card. A phone that features eSIM can be more easily switched from one carrier to another by sending a message to both the old and new provider. Since Verizon and AT&T control about 70% of the U.S. wireless industry, the two have a lot to lose if subscribers can more easily switch wireless firms.

The collusion investigation might have some unintended side effects. On Friday, JP Morgan analysts said in a note to clients, "A DOJ view that carriers are colluding could mean that a potential Sprint and T-Mobile merger would face higher scrutiny, making us somewhat less optimistic about that deal." Talks between the third and fourth largest wireless operators in the states broke down in 2014 due to worries about a possible merger receiving regulatory approval. Both firms have reportedly restarted talks about joining forces, which would create the second largest stateside wireless operator surpassing AT&T.

The note from JP Morgan points out that previous investigations into the major U.S. carriers have led nowhere and "we would be surprised to see a painful outcome for carriers in this one." Ironically, news about the investigation has led the G.S.M.A. to announce that it is putting work on developing a global standard for eSIM technology on hold while the investigation plays out. Yet, the New York Times says that the trade group itself is being looked at by the DOJ for its part in the alleged collusion between Verizon and AT&T. By halting work on eSIM technology, even temporarily, the G.S.M.A. gets the results it was supposedly seeking along with AT&T and Verizon.

"A DOJ view that carriers are colluding could mean that a potential Sprint + T-Mobile merger would face higher scrutiny, making us somewhat less optimistic about that deal."-JP Morgan analysts

The JP Morgan analysts go on to say that since "inserting a new SIM card is easy and often done by consumers or retail employees," they do not expect a DOJ probe to find much evidence of anti-competitive behavior on the part of the two aforementioned carriers.