Sprint, T-Mobile have to sell $26.5B deal to antitrust police

NEW YORK — To gain approval for their US$26.5 billion merger agreement, T-Mobile and Sprint aim to convince antitrust regulators that there is plenty of competition for wireless service beyond Verizon and AT&T.

The deal announced Sunday would combine the nation’s third- and fourth-largest wireless companies and bulk them up in size similar to Verizon and AT&T, the industry giants.

They say merging will allow them to better compete, not only with the top two rivals, but also with Comcast and others as the wireless, broadband and video industries converge.

“This isn’t a case of going from 4 to 3 wireless companies — there are now at least seven or eight big competitors in this converging market,” said T-Mobile chief executive John Legere, who would be the CEO of the combined company.

T-Mobile and Sprint have been considering a combination for years. But a 2014 attempt fell apart amid resistance from the Obama administration. And in 2017, another potential deal fell through as well.

The combined company, to be called T-Mobile, would have about 127 million customers. Consumers worry a less crowded telecom field could result in higher prices, while unions are concerned about potential job losses.

In a conference call with Wall Street analysts, Sprint CEO Marcelo Claure acknowledged that getting regulatory approval is “the elephant in the room.” One of the first things the companies did after sending out the deal’s news release was to call Ajit Pai, chair of the Federal Communications Commission.

The companies stressed that they plan to have more employees following the combination, particularly in rural areas, than they do as standalone companies now.

They also emphasized that the deal would help accelerate their development of faster 5G wireless networks and ensure that the U.S. doesn’t cede leadership on the technology to China.

And they said the combination would allow them to better compete with a growing number of competitors in a changing market.

Verizon and AT&T have been expanding their video-content businesses, while cable companies have been moving into wireless. That allows a single company to combine home and wireless internet and use content to support the communications businesses.

Comcast, the cable giant that finished buying NBCUniversal in 2013, offers customers wireless service by reselling access to Verizon’s network. So does another dominant cable company, Charter.

The companies said they expect the deal to close by the first half of 2019 and would result in about $6 billion in annual cost savings.

The deal will have to be reviewed by the U.S. Justice Department and the FCC.

Consumers are paying less for cellphone service thanks to TMobile’s influence on the industry and the resulting price wars.

Shares of T-Mobile fell $2.66, or 4.1 per cent, to $61.87 in morning trading Monday. Sprint shares fell 85 cents, or 17.1 per cent, to $5.65.