The $26.5B T-Mobile/Sprint Merger Moves a Big Step Forward

T-Mobile CEO John Legere and then-Sprint CEO Marcelo Claure agreed last year to combine their companies.

TRIPPLAAR KRISTOFFER/SIPA

The Justice Department Friday cleared T-Mobile’s long-delayed $26.5 billion merger with Sprint, a deal that critics say will reduce competition for wireless service and lead to higher prices. To win approval, the companies agreed to sell assets to Dish intended to help the company, which now provides satellite TV service, launch a new wireless carrier. The Justice Department blessing clears a major hurdle, but the deal still faces an antitrust suit from 13 states and the District of Columbia that could mean further delays.

If completed, the deal would strengthen T-Mobile’s position as the nation’s third-largest wireless carrier, with almost 114 million subscribers, after accounting for the 9 million Sprint customers that will be transferred to Dish. AT&T is the largest wireless carrier, with 156 million customers, and Verizon second with 118 million, according to the companies’ most recent filings with the Securities and Exchange Commission.

Justice Department officials said they approved the deal after they were convinced that the sale of Sprint’s so-called prepaid business, which includes the Boost Mobile and Virgin Mobile brands, and portions of Sprint’s wireless spectrum, would help Dish create a viable network. Dish will be required to build a network using wireless spectrum it previously licensed but has not used; it will also get access to at least 20,000 cell sites, and “robust” access to T-Mobile’s network for seven years. “We are expanding output significantly by ensuring that large amounts of currently unused or underused spectrum are made available to American consumers in the form of high quality 5G networks,” Makan Delrahim, head of the department’s antitrust division, said in a statement.

In an earlier agreement with the Federal Communications Commission, T-Mobile and Sprint pledged not to raise prices for three years and to expand rural coverage by building a 5G wireless network that will cover 97 percent of the US population within three years and 99 percent of the country within six years.

But critics said those agreements wouldn’t offset the harm of further consolidation in wireless service. “Allowing T-Mobile to acquire Sprint, and thus reduce the number of nationwide facilities-based wireless competitors from four to three, will result in higher prices for consumers and the reduced ability of consumers travelling through rural areas to access mobile wireless service,” the Rural Wireless Association, a trade group of small rural carriers, said in a statement. Expecting Dish to build a credible rival to the three big wireless carriers “spells disaster for American consumers.”

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In a statement, former FCC attorney Gigi Sohn, who testified against the deal before Congress, said the merger conditions are weak and unenforceable. “The state AGs who sued to block the merger shouldn’t be fooled by this weak attempt to maintain competition in the mobile wireless market,” she said.

Those state attorneys general argue that any benefits created by the merger would be offset by reduced competition. In announcing the lawsuit last month, New York Attorney General Letitia James called the deal “exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”

Under the deal, Dish would buy Sprint’s prepaid brands for $1.4 billion and pay $3.6 billion for some of T-Mobile and Sprint’s wireless spectrum licenses. The prepaid brands primarily resell access to other companies’ networks.

Dish has long promised to build a mobile network of its own using the spectrum it already controls but hasn’t done so. The deal with T-Mobile and Sprint would provide Dish with licenses for parts of the “low-band” range of the wireless spectrum, where signals are able to travel long distances, making it easier to blanket large areas with wireless coverage. The company already owns licenses for spectrum in the “mid-band” spectrum that carriers say will be crucial for next generation 5G networks.

The Obama-era FCC blocked an earlier attempt by the two companies to merge in 2014, but the carriers found more sympathy from both major political parties this time around. The companies announced the new deal in April 2018. Earlier this year, seven congressional Democrats and six Republicans sent a letter to the FCC and the Justice Department supporting the merger, arguing the combined company would be able to deploy 5G more quickly than the two companies could independently. T-Mobile also hired former FCC commissioner Mignon Clyburn, a Democrat, to advise the company on the deal.

If the merger is completed, T-Mobile owner Deutsche Telekom will own 42 percent of the new company and T-Mobile CEO John Legere will serve as CEO. SoftBank, the Japanese conglomerate that acquired Sprint in 2013, will own 27 percent and the remaining 31 percent will be held by the public.

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