Sprint, T-Mobile receive merger approval from Department of Justice

The Washington Post

(Dado Ruvic/Reuters)

The $26 billion merger between T-Mobile and Sprint secured final approval on Friday from the Department of Justice, where regulators blessed the combination of the country’s third- and fourth-largest wireless carriers after they agreed to sell off a critical portion of their business to Dish Network.

The green-light from the government’s antitrust watchdogs removes a significant federal hurdle that had been standing in the way of the two telecom giants, which had flirted for years over a potential tie-up in a bid to rival AT&T and Verizon — only to abandon their plans in the face of sustained Washington skepticism.

To win DOJ’s blessings, T-Mobile and Sprint have agreed to sell wireless spectrum, telecom infrastructure and other assets to Dish, a satellite-television company that long has harbored ambitions to become a national wireless carrier. The move is meant to satisfy regulators’ concerns that a combination of T-Mobile and Sprint would limit consumers’ options for phone service. Absent those divestitures, DOJ officials said Wednesday that they would have sued to stop the deal, citing the fact it would harm competition and consumers.

“We’ve reached a historic structural settlement with T-Mobile and Sprint after concluding their merger, without this remedy, would substantially harm competition,” said Makan Delrahim, the leader of the DOJ’s antitrust division. “The remedies set up Dish as a disruptive force in wireless.”

Under the deal, Dish must build a wireless network that services 70 percent of the United States by 2023, or it must pay a roughly $2 billion penalty to the government. Immediately, wireless analysts questioned whether the Englewood, Colorado-based satellite giant might ever hit that target, given the sheer cost of offering such 5G coverage at a moment when it has been shedding customers.

A federal judge must still approve the merger. So too must the Federal Communications Commission, though that agency’s Republican leaders previously expressed public support for the two wireless giants’ plans. T-Mobile and Sprint further have to contend with the attorneys general of New York, California and other states, who sued in recent weeks to stop the deal, arguing it could result in consumers paying higher prices for their phone service. The state leaders reaffirmed their opposition to the merger despite the DOJ’s settlement Friday.

“We have serious concerns that cobbling together this new fourth mobile player, with the government picking winners and losers, will not address the merger’s harm to consumers, workers, and innovation,” New York Attorney General Letitia James said in a statement Friday.

T-Mobile, which is operated by Germany’s Deutsche Telekom, and Sprint, which is owned by the Japanese conglomerate SoftBank, announced their $26.5 billion merger last April, describing the deal as necessary to deploy 5G, the next generation of ultra-fast wireless broadband service. Absent such a combination, T-Mobile and Sprint said they could not muster the necessary investments individually, putting them at a major disadvantage against AT&T and Verizon.

The two wireless carriers began pitching the deal to the FCC, which reviews mergers to see if they benefit the public, and DOJ, which studies competition, at a moment when Democrats and Republicans alike in Washington had started sounding new alarms about the dangers of corporate consolidation. In recent months, the merger attracted heightened attention from a trio of Democratic contenders for the White House in 2020 — Sens. Cory Booker (N.J.), Amy Klobuchar (Minn.) and Elizabeth Warren (Mass.) — who said it would result in “unacceptably high levels of concentration in an already consolidated wireless industry.”

Consumer groups such as Public Knowledge echoed those concerns, arguing that a combined T-Mobile and Sprint would result in higher prices and fewer options for consumers. Many critics pointed to the fact that T-Mobile already had become a fierce competitor— offering more customer-friendly contracts, for example — precisely because the government had warded off a merger by the two companies in the past.

But T-Mobile and Sprint offered concessions to reshape their deal in recent months in a bid to win over federal regulators. In May, the companies pledged to build out 5G wireless to 97 percent of the country, including much of rural America, while offering “same or better rate plans at the same or better prices” for the next three years. The announcement satisfied Ajit Pai, the chairman of the FCC, who warned the companies would “suffer serious consequences” if they break their promises.

With the DOJ, T-Mobile and Sprint agreed to divest wireless airwaves, hundreds of retail stores and thousands of cell sites, critical elements in the DOJ’s efforts to stand up a new fourth national wireless carrier in Dish. The merging companies also will give up their pre-paid phone businesses, Boost Mobile and Virgin Mobile.

The deal is valued at more than $5 billion, Delrahim said, and it will allow Dish to offer service over T-Mobile’s network until it’s able to operate its own. Existing spectrum holdings at Dish helped the companies sell their plan to the DOJ, officials said Friday.

“Taken together, these opportunities will set the stage for our entry as the nation’s fourth facilities-based wireless competitor and accelerate our work to launch the country’s first standalone 5G broadband network,” Charlie Ergen, the chairman and co-founder of Dish, said in a statement.

Some of the deal’s skeptics in recent months said that the companies’ concessions are unlikely to address their concerns: It could take too long for the sale of spectrum and other assets to result in a carrier able to compete with AT&T, Verizon and a merged T-Mobile and Sprint.

“A new mobile wireless entrant that starts with zero postpaid subscribers and that must rely on its much bigger rival, the new T-Mobile, just to operate is not a competitor. It’s a mobile Frankenstein,” said Gigi Sohn, a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy.

The deal replaces a weak competitor in Sprint with a potentially weaker one in Dish, said Roger Entner, a wireless industry analyst and founder of Recon Analytics. The constraints on Dish’s business would prevent it from being able to price its services competitively, he said. Adding to Dish’s challenges, he said, consumers seem to care more about reputation than price in choosing a carrier.

Many Democrats also remain unconvinced. FCC Commissioner Jessica Rosenworcel said earlier this year she had “serious doubts” about consolidation in wireless. “I remain skeptical that this combination is good for consumers, good for competition, or good for the economy,” she said Friday.

Brendan Carr, a Republican commissioner at the FCC, took a different view: “I think even without the Dish piece of this, our record was very clear about the consumer benefits that are going to derive from [the merger].”

Taylor Telford contributed to this story.

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