The Republican-controlled Federal Communications Commission indicated on Monday that it would approve the T-Mobile-Sprint merger after the two companies agreed to spin off Boost Mobile and submit to other conditions for the $26 billion deal.
Ajit Pai, the FCC's Republican chairman, said in a statement Monday morning that he was encouraged by the companies' commitments to expand rural connectivity and to build out a large next-generation 5G wireless network as conditions for approving the merger.
“In light of the significant commitments made by T-Mobile and Sprint as well as the facts in the record to date, I believe that this transaction is in the public interest and intend to recommend to my colleagues that the FCC approve it," Pai said.
His two Republican colleagues on the commission also announced their support for the deal, giving it the majority it needs to gain approval.
The announcement sent Sprint's shares up more than 26 percent after the markets opened Monday morning, before ending the day above 12 percent. T-Mobile's shares closed the day up just under 4 percent.
In a filing submitted Monday morning, T-Mobile and Sprint pledged to build out a 5G wireless network that would cover 97 percent of Americans within three years and 99 percent within six years.
The combined company also committed to selling off Boost Mobile, Sprint's prepaid wireless brand and a competitor to T-Mobile's Metro PCS.
Democratic Commissioner Jessica Rosenworcel said she has "serious doubts" about Pai's proposal to approve the transaction.
Even with FCC approval, the merger will still need to get the Justice Department's blessing, and media reports over the last several months indicate that the agency's Antitrust Division has expressed concerns about combining two of the only four national phone carriers. It could also face opposition from state attorneys general, many of whom are reportedly concerned about the merger.
In the commitments submitted to the FCC Monday morning, T-Mobile and Sprint proposed paying significant “voluntary contributions” to the Treasury Department in lieu of regulatory fines if the FCC determines that the new company has breached any of the conditions of the merger.
Those commitments also include a pledge not to raise prices for three years following the merger, widespread 5G coverage for rural residents and the creation of a new in-home broadband service.
The proposed deal has generated significant opposition, mainly from Democrats and advocacy groups who worry about further concentration in the industry and the potential for higher prices for consumers.
The deal’s biggest critics are unlikely to be won over by the commitments the companies are making to the FCC or by the agency’s apparent willingness to abdicate its ability to issue fines if the post-merger company breaks those promises.
“The supposed three-year price freeze is meaningless in a wireless market where prices are falling and likely would continue to drop in the absence of this merger,” Matt Wood, general counsel for the consumer group Free Press, said in a statement. “The little bit of price competition people have enjoyed thanks to the rivalry between Sprint and T-Mobile could keep sending prices lower."
"A meaningless and unenforceable promise to just tread water where we are now is a sad joke, and nothing more,” Wood added.
Rep. David Cicilline (D-R.I.), who chairs the House Judiciary subcommittee on antitrust, also said that he found Pai's statement "deeply concerning."
"Consolidation is a threat to progress and economic opportunity, not the driver of it," Cicilline said in a statement. "Actual competition in the wireless market is critical to building out the next generation of internet and wireless services.
"Empty promises will not make this transaction a good deal for American workers and consumers," he continued. "The burden is on Sprint and T-Mobile to show that this deal is not illegal. I expect the Justice Department to hold them to that longstanding requirement."
The Communications Workers of America has also railed against the merger, warning that the combination would ultimately lead to 30,000 jobs being cut.
A senior FCC official told reporters on a call Monday morning that regulators did not take into account the concerns about job cuts but believe that building out a nationwide 5G network will be a job creator.
Gigi Sohn, who served as an adviser to former FCC Chairman Tom Wheeler (D), said that the FCC would have a hard time holding the combined company accountable for the promises it’s making.
“Even if you have the strongest FCC, the companies still litigate the living daylights out of this stuff,” Sohn told The Hill. “These companies have far more resources than the FCC.”
Sohn also pointed out that Makan Delrahim, the head of the Justice Department’s Antitrust Division who will have final say over the deal, has spoken out against the type of behavioral merger conditions that the FCC is embracing.
“It seems that the real question is whether the DOJ is on the same page,” she said.
Updated at 5:38 p.m.