T-Mobile, Sprint clear one hurdle to merger
FCC chairman would support deal combining No. 3, 4 wireless providers, but Justice Dept. approval still needed
T-Mobile and Sprint, the third- and fourth-largest wireless providers in the United States, on Monday moved a step closer to completing a $26 billion merger that would create a hefty new rival to the industry’s leaders, securing the public support of the Federal Communications Commission’s chairman by pledging to develop wireless technology that is a top priority of the Trump administration.
Ajit Pai, the commission chairman, recommended that the agency approve the deal based on what he called the companies’ “significant commitments” to expand rural broadband service, build a robust 5G network and sell off Boost Mobile, a Sprint-owned product that sells prepaid services popular with lower-income customers.
Pai said the steps the companies had outlined in seeking the government’s blessing were in line with the commission’s goals.
“Two of the FCC’s top priorities are closing the digital divide in rural America and advancing United States leadership in 5G, the next generation of wireless connectivity,” Pai said in a statement. “The commitments made today by T-Mobile and Sprint would substantially advance each of these critical objectives.”
The companies’ promise to build out 5G technology, which brings faster-than
broadband speeds through the air, has been the centerpiece of their argument for why the merger should be approved.
In addition to extending reliable internet access to poor, rural areas, 5G technology is expected to fuel the development of autonomous cars and other moonshot projects. President Donald Trump has argued that it is critical to national security and has cited its importance in his administration’s crackdown on the Chinese telecommunications giant Huawei.
By securing Pai’s recommendation, the companies cleared a key hurdle toward creating a wireless carrier with more than 125 million customers that
would immediately become a strong competitor to AT&T, which has 148 million, and Verizon, which has 118 million.
John Legere, chief executive of T-Mobile and a colorful presence on Twitter, would become the leader of a combined company.
“We took some action on those discussions, and we submitted a set of commitments to the FCC around the New T-Mobile to address what we’ve heard,” he said in a statement.
A vote of the agency’s five commissioners is expected in the coming weeks and could fall along party lines. Pai, a staunch advocate of deregulation, leads the agency’s Republican majority.
Democrats and consumer advocates have previously criticized the proposed
transaction, arguing that it would lead to higher prices. Jessica Rosenworcel, a Democratic commissioner, said after Pai’s announcement that she had “serious doubts” about the deal, citing similar mergers in the airline and drug industries.
“It hasn’t worked out well for consumers,” she added.
The companies also are awaiting the approval of the Justice Department, which is expected to issue a decision on the matter in the coming weeks. The agency’s mandate — to focus on whether such deals harm competition — differs from the FCC’s, potentially posing a greater regulatory obstacle.
In 2011, the Justice Department blocked AT&T’s proposed acquisition of TMobile. In that instance,
both the Justice Department and the FCC concluded that reducing the number of major wireless carriers from four to three could hurt consumers.
“That is as much of a concern as it always was,” Craig Moffett, a founder of the research firm MoffettNathanson, said. He added that it would be a mistake to assume that Pai’s recommendation “suddenly makes the deal a slam dunk.”
The Justice Department’s top antitrust regulator, Makan Delrahim, has had to review a flurry of mergers since moving into the job several years ago. He sued AT&T, unsuccessfully, to block it from buying Time Warner. Around the same time, he approved The Walt Disney Co.’s deal to acquire the bulk of Rupert Murdoch’s
21st Century Fox, barely six months after the transaction was announced. It was a relatively speedy turnaround for an acquisition that might normally take at least a year.
The Justice Department would have to review the concessions offered to the FCC and determine whether they were adequate to satisfy antitrust concerns. Delrahim generally favors what are called structural remedies to such transactions, which typically involve divestitures like the proposed Boost Mobile sale.
T-Mobile and Sprint announced their plans to merge in April 2018, and Legere and Marcelo Claure, Sprint’s executive chairman, have been on a charm offensive since then in hopes of securing approval for the deal.
Legere has made numerous visits to the FCC and the Justice Department, documenting his activity on social media. A month after the merger was announced, Claure was a host of a fundraiser for Marsha Blackburn, a Republican congresswoman at the time who was running for Senate. Blackburn, a longtime supporter of the telecommunications industry, was elected to the Senate in November.
Lawmakers have expressed concern over Legere’s Washington forays, including the dozens of stays by him and other TMobile executives at the Trump International Hotel in the city. Some lawmakers have suggested that the companies were trying to buy the Trump administration’s support.