T-Mobile-Sprint deal wins Justice Department approval
U.S. regulators have approved T-Mobile US Inc.'s $26.5-billion takeover of rival Sprint Corp., despite fears of higher prices and job cuts, in a deal that would leave just three major cellphone companies in the country.
Friday’s approval from the Justice Department and five state attorneys general comes after Sprint and T-Mobile agreed to conditions that would set up satellite TV provider Dish Network Corp. as a smaller rival to Verizon Communications Inc., AT&T Inc. and the combined T-Mobile-Sprint company. The Justice Department’s antitrust chief, Makan Delrahim, said the conditions set up Dish “as a disruptive force in wireless.”
But attorneys general from other states — including California — and public-interest advocates say that Dish is hardly a replacement for a stand-alone Sprint and that the conditions fail to address the competitive harm the deal would cause: higher prices, job losses and fewer choices for consumers.
“By signing off on this merger, the Justice Department has done nothing to remedy the short- and long-term harms the loss of an independent Sprint will create for U.S. wireless users,” said S. Derek Turner, research director for the advocacy group Free Press.
The approval still needs a federal judge to sign off, as Sprint and T-Mobile’s settlement with the Justice Department includes conditions. The Federal Communications Commission is expected to give the takeover its blessing.
Dish is paying $5 billion for Sprint’s prepaid cellphone brands including Boost and Virgin Mobile — with about 9 million customers — and some spectrum, or airwaves for wireless service, from T-Mobile and Sprint. Dish will also be able to rent T-Mobile’s network for seven years while it builds its own.
Dish promised the FCC on Friday that it would build a nationwide network using next-generation 5G technology by June 2023. But Dish is promising speeds that are only slightly higher than what’s typical today, even though 5G promises the potential for much faster speeds.
The Trump administration has not been consistent in its approach to media and telecom mergers. Whereas it went to court to block AT&T’s acquisition of Time Warner and then lost, the Justice Department allowed Walt Disney Co. to buy much of 21st Century Fox, a direct competitor, with only minor asset sales to get the deal done. Mergers between direct competitors historically have had a higher bar to clear at the Justice Department.
Sprint and T-Mobile combined would now approach the size of Verizon or AT&T. The two merging companies have argued that bulking up will mean a better 5G wireless network than either could build on its own. Sprint and T-Mobile have argued for more than a year that having one big company to challenge AT&T and Verizon, rather than two smaller companies, would be better for U.S. consumers.
The two companies tried to combine during the Obama administration, but regulators rebuffed them. They resumed talks on combining once President Trump took office, hoping for more industry-friendly regulators. The companies appealed to Trump’s desire for the United States to “win” a global 5G race with China.
The FCC agreed in May to back the deal after T-Mobile promised to build out rural broadband and 5G to nearly the entire country, sell off its Boost prepaid brand and keep price changes on hold for three years.
Attorneys general from 13 states and the District of Columbia — separate from the five states that approved the deal — have filed a lawsuit to block the deal. They say the promised benefits, such as better networks in rural areas and faster service overall, cannot be verified. They also worry that eliminating a major wireless company would immediately harm consumers by reducing competition and driving up prices for cellphone service.
“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 Atty. Gen. Letitia James said in a statement.
T-Mobile Chief Executive John Legere said Friday that he believes the deal can close by the end of the year and that the company will engage with the state attorneys general who oppose the deal.
Dish is largely a company with a declining satellite TV business. It has no wireless business, but over the last decade it has spent more than $21 billion accumulating a large stock of spectrum for wireless service. The wireless industry has long been skeptical of Dish’s ambitions to actually build a wireless service, speculating that Dish wanted instead to make money by selling its holdings to other companies.
Recon Analytics founder Roger Entner, a longtime telecom analyst, said the settlement was good for T-Mobile, AT&T and Verizon, as a weak competitor in Sprint is being replaced by an even weaker one in Dish.
Sprint, the current No. 4 wireless provider, has thousands of stores and other distribution points as well as a cellular network. Dish has none of that, although the settlement gives it the option of taking over some stores and cell sites that T-Mobile ditches over the next five years. Creating and maintaining a retail operation and network cost tens of billions of dollars, Entner said. He doubts that Dish could do that alone, as its core business is in deep decline, or that Dish could find a wealthier company to help it do so.
But New Street Research analysts say Dish could build a lower-cost network and provide cheaper plans for customers. Still, that could take years.
There are incentives built into the agreement that would keep Dish from sitting on spectrum assets rather than building them out into a network, Delrahim said. If the company doesn’t live up to its promises, it will face billions of dollars in penalties.
George Slover, senior policy counsel for Consumer Reports, said the current structure of four competing providers works. He said it’s not the same to diminish that while enabling a competitor that currently lacks the infrastructure.
“Dish might become a competing network at some point, but it’s not there now,” he said.
The Communications Workers of America, a union that represents telecom workers, says the deal will kill 30,000 jobs and weigh on workers’ wages.
T-Mobile’s stock jumped more than 5% on Friday, while Sprint shares rose more than 7%. Dish shares rose less than 1%. Verizon and AT&T shares also climbed.
Japanese tech conglomerate SoftBank owns Sprint, while Germany’s Deutsche Telekom owns T-Mobile. SoftBank will continue to own 27% of the new, bigger T-Mobile and will keep some influence, but it will not control the company.
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