By Drew FitzGerald and Sarah Krouse
The Justice Department approved T-Mobile US Inc.'s merger with
Sprint Corp. after the companies agreed to create a new wireless
carrier by selling assets to satellite-TV provider Dish Network
The landmark antitrust agreement seeks to address concerns that
the combination of T-Mobile, the nation's No. 3 carrier by
subscribers, and No. 4 Sprint will drive up prices for consumers.
It would leave more than 95% of American cellphone customers with
the top three U.S. operators.
A deal brokered by the Justice Department will require Dish,
which has been sitting on valuable airwaves, to build a 5G network
for cellphone customers. To help it get started, T-Mobile will sell
Sprint's prepaid brands to Dish and give access to the combined
carrier's network for seven years.
"The remedies set up Dish as a disruptive force in wireless"
with the pieces needed for the company to have a network that is
ready to go, Makan Delrahim, the Justice Department's antitrust
chief, said in a news conference.
Critics of the arrangement include a group of state attorneys
general that broke with the Justice Department and have filed an
antitrust lawsuit seeking to block the more than $26 billion
merger. Five states that weren't part of the lawsuit joined the
federal government in the settlement announced Friday.
"Why scramble so much to create a fourth competitor when you
already have one?" said Samuel Weinstein, an assistant law
professor at the Cardozo School of Law at Yeshiva University who
worked previously in the Justice Department's antitrust unit.
The deal gives Dish, a satellite-TV provider, about 9 million
Sprint prepaid cellphone customers and additional wireless
spectrum. Those subscribers represent about a fifth of Sprint's
T-Mobile and Sprint must also give Dish access to at least
20,000 cell sites and hundreds of retail locations. The new
T-Mobile must provide "robust access" to its network, the Justice
The union of T-Mobile and Sprint, years in the making, would
create a wireless company with more than 80 million U.S. customers,
closing the gap with Verizon Communications Inc. and AT&T Inc.,
which each have roughly 100 million wireless customers. It also
would fulfill a long-held goal of Japan's SoftBank Group Corp.,
which owns most of Sprint, and Deutsche Telekom AG, which controls
Shares of T-Mobile rose on the news and are trading near
all-time highs. Sprint shares also were higher. Dish, whose stock
price has slumped this week on news of the arrangement, were up
Federal Communications Commission Chairman Ajit Pai, who had
previously backed the deal, said Friday the Justice Department
settlement, coupled with T-Mobile and Sprint's earlier commitments
to deploy a nationwide 5G network, will preserve competition and
advance U.S. leadership in rolling out next-generation
U.S. carriers have been battling for customers in the $180
billion voice-and-data market, where growth has slowed now that the
companies have rolled out unlimited data plans and most Americans
have upgraded to smartphones.
The federal approval for T-Mobile and Sprint caps a more than
yearlong review of a combination that fell apart twice in the past
five years over terms of the deal or fears that the Justice
Department would object.
The Justice Department, under the Obama administration, told the
companies that shrinking from four to three national providers was
anticompetitive. The companies tried again under Trump appointees
to push the deal through, ultimately agreeing to divest assets to
Dish to win approval.
In its agreement with the government, T-Mobile promised not to
raise prices for three years and cover 97% of the U.S. population
with 5G service in three years.
T-Mobile has been adding millions of customers at the expense of
its rivals, pushing unlimited data plans and lower prices than the
incumbents. Sprint, despite owning valuable airwaves, has been
shedding millions of subscribers and has struggled to be
T-Mobile surpassed Sprint to become the No. 3 player by
subscribers and argued the acquisition of the smaller carrier's
airwaves would help speed its deployment of a 5G network so that it
could better compete with Verizon and AT&T.
Dish, which generated $13.6 billion in annual revenue last year,
had about $13 billion of net debt before the deal. It will need to
shell out billions of dollars in the coming years to absorb the
wireless carriers' castoff assets, build its own network and vie
A group of states led by the attorneys general of New York and
California are pressing ahead with an antitrust lawsuit seeking to
block the combination, saying it would harm consumers. All the
officials who joined the suit are Democrats; those who decided to
support the Justice Department on Friday are Republicans.
Letitia James, the New York attorney general, said the coalition
of state officials seeking to block the deal oppose the Justice
Department's settlement. "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," she said.
Mr. Delrahim said his office will share its settlement with the
federal judge overseeing the states' lawsuit. "Sometimes
independent sovereigns do make independent determinations," he
said. The trial is scheduled to start in October. On Friday,
T-Mobile and Sprint extended the deadline to close their deal, from
July 29 to Nov. 1.
The Justice Department stopped sharing information with the
Democratic attorneys general after they decided to file their
lawsuit in June without notifying their federal counterparts, he
said. "That was their choice, not ours," he said.
Under the deal, Dish will pay $1.4 billion for the Sprint
customer accounts, most of which come from its Boost Mobile prepaid
brand, and $3.6 billion three years later to buy Sprint spectrum
licenses in the 800-megahertz range, which can travel long
distances and cover rural areas.
The new T-Mobile will have the option to lease back part of that
spectrum for an additional two years after the airwaves sale
closes. The companies have also agreed to negotiate for T-Mobile to
lease Dish spectrum in the 600-megahertz range.
Dish is set to start its wireless life with a base of Sprint's
pay-as-you-go customers, though carriers often struggle to keep
those so-called prepaid subscribers. More than 4% of Sprint's
prepaid customers choose to drop their service or are disconnected
for nonpayment each month, according to company filings.
The deal creates a fake competitor, said Andrew Jay Schwartzman,
a lecturer at Georgetown Law, adding that even if Dish builds out
its own network it will take years. During that time, the three
large carriers will be able to introduce 5G and lock in their
subscriber bases, he said.
"Rather than having Sprint as a weak fourth competitor, the
combined companies will now face an extremely weak fourth
competitor," Mr. Schwartzman said.
Sprint ended March with nearly $33 billion of net debt on its
balance sheet. Even though it had more than 40 million customers,
Sprint said during deal negotiations that it was in poor health and
wouldn't be able to launch nationwide 5G service without the
Dish has argued it can build a better network by starting from
scratch. Even before he pursued a deal with the Justice Department,
Dish Chairman Charlie Ergen said his business could invest capital
more efficiently without the burden of old equipment and software
holding back its ambitions. Dish hasn't made public the prices or
structure of the wireless plans it will sell.
Write to Drew FitzGerald at email@example.com and Sarah
Krouse at firstname.lastname@example.org
(END) Dow Jones Newswires
July 26, 2019 12:55 ET (16:55 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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