DOJ approves T-Mobile-Sprint merger

DOJ approves T-Mobile-Sprint merger
© The Hill illustration

The Department of Justice on Friday announced it has approved the $26 billion T-Mobile–Sprint merger, paving the way towards a deal that will combine two of the country's largest mobile carriers into one company with more than 80 million U.S. customers.

The department's approval means both federal agencies overseeing the merger have given it their blessing, though a legal challenge by state attorneys general could still block the deal from going through.

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The DOJ's plan requires T-Mobile and Sprint to hand over assets including wireless spectrum and subscribers to Dish, a satellite television company that has been tapped to create a mobile network to compete with the merged company.

The DOJ came to the agreement with the state attorneys general for Nebraska, Kansas, Ohio, Oklahoma and South Dakota, none of which are involved in the separate lawsuit from the states to block the merger.

During a press conference announcing the deal, DOJ antitrust chief Makan Delrahim argued the remedies will help set up Dish as a strong competitor, calling it a potentially "disruptive force." 

"In our view and in our judgements, this remedy package is actually better than the status quo because consumers will benefit, the economy will benefit and frankly we’ll probably have more competition than we have today," he said.

Under the deal with DOJ, T-Mobile and Sprint are required to divest Sprint's prepaid businesses including Boost Mobile, Virgin Mobile and Sprint prepaid, to Dish. Dish would be allowed to use T-Mobile's network during a seven-year transition period "while Dish builds out its own 5G network," according to DOJ.

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The carriers will also be required to support phone features that make it easier for customers to switch from one carrier to another.

The conditions of the deal are aimed at propping up a fourth mobile carrier in the U.S., an attempt to assuage concerns over whether the deal is anti-competitive.

"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," Delrahim said in a statement.

Dish on Friday said it has pledged to the Federal Communications Commission (FCC) that it will build out its next-generation wireless – also known as 5G – network to reach 70 percent of the U.S. population by June 2023. 5G is expected to offered extremely mobile speeds.

But critics argue that Dish will not be a sufficient fourth wireless carrier despite the 5G promises. They are pointing to studies suggesting the merger will result in higher prices for consumers and noting it will be difficult for Dish to go head-to-head with the established and better-resourced companies.

"Given incontrovertible evidence of higher prices and reduced competition, Assistant Attorney General Makan Delrahim should have blocked this merger," Gigi Sohn, a former adviser at the Federal Communications Commission (FCC) under the Obama administration, said in a statement.

"A new mobile wireless entrant that starts with zero postpaid subscribers and that must rely on its much bigger rival, the new T-Mobile, just to operate is not a competitor," she added. "It's a mobile Frankenstein."

George Slover, the senior policy counsel with advocacy group Consumer's Union, said during a phone call with reporters that it will likely take years for Dish to set up an effective network that matches Sprint's current abilities.

"The side Dish does little, if anything, to address the fundamental concerns that this merger is going to harm competition," he said. "Sprint is an established, experienced wireless carrier with a demonstrated track record as a strong competitor. Dish would be an unproven newcomer trying to build a wireless network from scratch." 

The backlash to the merger has been swift, with an array of Democrats, including some 2020 presidential contenders, calling it a raw deal for consumers.

Sen. Amy KlobucharAmy Jean KlobucharKlobuchar knocks Trump: 'This negotiating by tweet hasn't been working' Sunday shows preview: Trump ratchets up trade war with China Steyer calls on DNC to expand polling criteria for debates MORE (D-Minn.), who has long railed against the megamerger and has positioned herself as a critic of tech's extraordinary market power, said it "looked like a bad deal" when she first criticized it months ago and "it looks like a bad deal today" despite the remedies. Sen. Cory BookerCory Anthony BookerSteyer calls on DNC to expand polling criteria for debates Gabbard hits DNC over poll criteria for debates The Hill's Campaign Report: Democratic field begins to shrink ahead of critical stretch MORE (D-N.J.) called it "alarming," saying it hinges on "grandiose promises from the parties that will be difficult to verify, let alone enforce." 

Democratic lawmakers have railed against the deal for the past year, urging regulators to block it due to the potential for heightened prices for consumers.

The DOJ decision comes after the Republican-controlled FCC earlier this year signaled it will approve the merger under certain conditions, including that the merger results in increased coverage for rural areas.

As part of the deal with the FCC, T-Mobile and Sprint have pledged to build out a 5G network would cover 97 percent of Americans within three years and 99 percent within six years. They also committed to selling off Boost Mobile, Sprint's prepaid wireless brand.

FCC Chairman Ajit Pai said Friday that he plans to finalize the agency's approval soon with an order to be voted on by the commissioners.

“I am pleased that the U.S. Department of Justice has reached a settlement with T-Mobile and Sprint," Pai said in a statement. "The commitments made to the FCC by T-Mobile and Sprint to deploy a 5G network that would cover 99% of the American people, along with the measures outlined in the Department’s consent decree, will advance U.S. leadership in 5G and protect competition."

FCC senior officials on a call with reporters said the agency's staff are working to revise the order in light of the DOJ's settlement, predicting the commissioners will see a draft soon.

But a lawsuit from nearly a dozen attorneys general could block the merger, or at least leave it tied up in litigation for a significant amount of time. 

The state attorneys general and the defendants in the case — led by Deutsche Telekom, T-Mobile's German parent company — have agreed the merger cannot be completed until the judge makes a final decision. The proceedings are expected to start in the fall. 

In a new statement Friday, the coalition of attorneys general reaffirmed they do not support the DOJ's decision.

"The promises made by DISH and T-Mobile in this deal are the kinds of promises only robust competition can guarantee,” New York Attorney General Letitia James said. “We have serious concerns that cobbling together this new fourth mobile player, with the government picking winners and losers, will not address the merger’s harm to consumers, workers, and innovation."

The state attorneys general in the lawsuit filed last month argued the bid to combine two of the nation’s four top mobile carriers would jack up prices for customers, particularly those from low-income backgrounds, and result in unhealthy market concentration.

James on Friday tore into the idea that Dish could offer a viable fourth option, saying, "Dish has no experience building or operating a nationwide mobile wireless network."

“This is exactly the sort of consumer-harming, job-killing mega-merger our antitrust laws were designed to prevent,” James said at a press conference. 

Legal experts have predicted the legal battle could drag on for months or even years.

Reports this week have indicated the DOJ is seeking to negotiate with the state attorneys general, but one of the leaders of the lawsuit, California Attorney General Xavier BecerraXavier BecerraCalifornia leads states in lawsuit over Trump public charge rule Overnight Energy: Trump sparks new fight over endangered species protections | States sue over repeal of Obama power plant rules | Interior changes rules for ethics watchdogs California counties file first lawsuit over Trump 'public charge' rule MORE, has not met with the DOJ about the issue, a spokesperson told The Hill. And James told reporters that she has not had communication with the DOJ since the states announced their lawsuit last month. 

At Friday's press briefing, Delrahim said he doesn't foresee DOJ intervening in the states' case, but added that DOJ will provide input if the judge handling the case requests it.

He noted that the states had filed their lawsuit without alerting DOJ ahead of time.

"If the states continue to litigate in light of this, they would have to litigate the fix now, so that’s one of the challenges," Delrahim said. "But who the heck knows?" 

James confirmed the states will have to amend their lawsuit in order to take the DOJ settlement into account.

"Again, we remain committed to protecting competition in the marketplace," she said. 

—Harper Neidig contributed. Updated at 3:12 p.m.