Justice Department OKs T-Mobile-Sprint merger, with conditions

The Department of Justice on Friday approved the long-awaited $26 billion merger of T-Mobile US Inc. and Sprint Corp., cutting a deal with a number of state attorneys general who had sued to block the deal and setting the stage for faster implementation of 5G service.

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Under terms of the department's approval, T-Mobile and Sprint must divest Sprint’s prepaid business, including Boost Mobile, Virgin Mobile and Sprint prepaid, to Dish Network Corp., a Colorado-based satellite television provider. 

The approval also provides for the divestiture of certain spectrum assets to Dish.  Additionally, T-Mobile and Sprint must make available to Dish at least 20,000 cell sites and hundreds of retail locations.  T-Mobile must also provide Dish with robust access to the T-Mobile network for a period of seven years while Dish builds out its own 5G network.

TickerSecurityLastChangeChange %
TMUST-MOBILE US INC76.84-1.13-1.45%
SSPRINT CORP.5.87-0.19-3.14%

“With this merger and accompanying divestiture, 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,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division.  “Today’s settlement will provide Dish with the assets and transitional services required to become a facilities-based mobile network operator that can provide a full range of mobile wireless services nationwide.  I want to thank our state partners for joining us in this settlement.”

Delrahim added, “In crafting this remedy, we are also mindful of the significant commitments T-Mobile, Sprint, and Dish have made to the Federal Communications Commission.”

Delrahim delayed the issuance of a so-called consent decree on the merger — effectively giving the agency’s green light on the deal as long as certain conditions were met — as he and his staff tried to convince at least some of the 17 state AGs who had sued to block the deal to drop their opposition.

The DOJ's delay of announcing its approval had unsettled investors and industry executives given the lengthy and complicated process that has led the antitrust division to be on the verge of approving the controversial merger.

The merged company will become the fourth major wireless carrier to compete with AT&T, Verizon and the combined T-Mobile Sprint, and according to the DOJ eliminate those antitrust concerns over a lack of wireless competition by some the DOJ’s own staffers as well as the AGs who joined the litigation.

“These developments are the fulfillment of more than two decades’ worth of work and more than $21 billion in spectrum investments intended to transform DISH into a connectivity company,” DISH Co-Founder and Chairman Charlie Ergen said in a statement. “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.”

DISH’s proposed asset acquisitions from Sprint are valued at approximately $5 billion, including a $1.4 billion purchase of Sprint’s prepaid businesses, and a $3.6 billion agreement to purchase Sprint’s nationwide 800 MHz wireless spectrum. The spectrum purchase is expected to be completed three years after the closing of the acquisition of the prepaid businesses.

In the complicated negotiations, Dish agreed to buy both assets and spectrum from the T-Mobile and Sprint to create the network in a way that had seemed to appease the antitrust staff in the DOJ, who initially opposed the merger, and both companies, which didn’t want to give up so much spectrum that they would be at a competitive disadvantage.

A major existential threat to the merger had been the state AGs lawsuit, which could have bogged down both companies in federal court for years. The theory driving the DOJ’s delay was that by negotiating with the states, even picking off one AG would weaken the rest of the opposition in the courts.

Officials from T-Mobile, Sprint and Dish didn’t return calls for comment.

The DOJ nod follows a months-long regulatory review that has been described as the "War and Peace" of antitrust evaluations to ensure the creation of a combined T-Mobile and Sprint wouldn’t lead to higher wireless prices because it effectively eliminates a major carrier.

Announced in April 2018, the merger between T-Mobile, the nation’s third-largest wireless operator, and Sprint, the fourth-largest operator, was contentious from the onset because it would have reduced the number of major wireless carriers to three from four, automatically sparking an antitrust review by government agencies.

In May, lawyers for T-Mobile and Sprint convinced the GOP-controlled Federal Communications Commission that such a move wouldn't lead to higher wireless prices for consumers because Sprint was such a weak competitor compared to players like AT&T, Verizon and T-Mobile. By teaming up with T-Mobile, Sprint might be able to survive financially, allowing the combined company to compete on price with the others, the companies argued.

Officials in the Trump White House and the president himself were on board for another reason: The new company would emerge as a major player in the development of a superfast 5G wireless network, allowing the U.S. to compete against countries like China. The Trump administration believes U.S. competitiveness in 5G is both an economic and national security priority since the technology is expected to create millions of jobs and can be used for espionage purposes.

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But the final word on any merger always comes from the DOJ's antitrust division, which could sue to block it. Delrahim is a Trump appointee, but the agency’s staff does not align itself with the free-market thinkers in the White House led by economic advisers Larry Kudlow and Treasury Secretary Steven Mnuchin.

Rather, it is largely comprised of career lawyers with a consumerist viewpoint. They blocked similar deals such as AT&T’s proposed merger with T-Mobile in 2011. Legere, in 2014, was back with another deal, this time to combine with Sprint. But that effort fizzled out before it could even be reviewed by the DOJ when the Obama FCC voted no on the combo.