T-Mobile US, Inc. and Sprint Corp. have taken the first, albeit small step to launch settlement discussions with a group of state attorneys general who threaten to potentially derail their $26 billion merger, FOX Business Network has learned.
Officials at T-Mobile and Sprint have begun exploring possible settlement ideas both internally and with the state AGs, according to sources with direct knowledge of the matter. It is unclear how the state attorneys general responded or if there will be any progress before the December 9th Federal court hearing in the Southern District of New York.
People close to the company offered caution that talks are just beginning and that no one expects a result imminently; one person with knowledge of the matter said the parties are still “miles away” from an agreement.
Still, even the early-stage talks are important. The state attorneys general, led by New York State’s Letitia James, have sued to block the merger on the grounds that it will quash competition significantly by combining two of the top wireless carriers in the business. The state AGs have at least so far been unmoved by the July Justice Department settlement that greenlighted the merger after T-Mobile and Sprint agreed to unload enough spectrum to create another wireless carrier out of media mogul Charlie Ergen’s Dish Network.
Dish, under the DOJ plan, would join AT&T, Verizon and the combined T-Mobile-Sprint in the wireless market. But the state AGs have maintained that Dish would be a weak fourth carrier, and wouldn’t have enough scale to effectively compete on pricing, thus consumers would probably pay more for wireless services. The AG coalition is growing: Following the DOJ settlement, two state AGs have joined the coalition, Texas and Oregon, bringing the total number of states joining the lawsuit to 16.
The state AGs position –and their growing numbers – has now forced executives at T-Mobile and Sprint to explore a further compromise that could either lead to some of the AGs dropping the lawsuit or the entire group to abandon their litigation, according to people with direct knowledge of the matter.
A spokesman for Letitia James, the attorney general leading the coalition of the 16 state attorneys general against the deal, did not respond to request for comment. A spokesman for T-Mobile did not respond to request for comment.
The preliminary talks come as the Trump administration continues to push for the merger to take shape based on the policy goal that a combined T-Mobile and Sprint will emerge as a formidable player in the economically important race to develop super-fast 5G wireless technology. Earlier Wednesday, Federal Communications Commission Chairman Ajit Pai formally endorsed the deal and circulated a draft order for other commissioners to sign.
The Trump Administration believes 5G technology could create millions of new jobs and significant economic growth; its advancement will also aid in national security since administration officials believe the Chinese could use the technology for espionage purposes.
Even with the administration in its corner, the companies believe the state AGs lawsuit could at least delay the official closing of the merger, slated for this year. One option is to weaken the case in federal court by entering into settlement talks where the companies can “pick states off” the lawsuit by agreeing to additional conditions not reached with DOJ antitrust, according to one person with direct knowledge of the matter.
If T-Mobile and Sprint can get 50 percent of the states to drop out “the momentum swings away from the coalition of AGs,” this person added.
The companies are considering a number of ways to appease the AGs. One idea T-Mobile has floated is to help fund a similar program to the federally-subsidized wireless program for low-income people, known as the Lifeline Assistance Program. The program allows eligible people to buy mobile telephone services at a discount and could potentially offer people in the program broadband service as well.