[Update 5: Justice Department Approves] Sprint and T-Mobile have agreed to merger, pending regulatory approval
We could soon see the number of major mobile carriers in the United States decrease from four to three if things go according to plan. T-Mobile and Sprint have finally agreed to merge, so long as the merger is approved by anti-trust regulators, that is. The companies were reportedly in talks to merge in September last year, and it was then later reported that discussions had been dropped – largely due to how much control Deutsche Telekom would have over Sprint (not to mention the valuation of the company’s shares as well). But now, it seems that the merger talks have finally led to a deal between the two carriers as T-Mobile agrees to acquire Sprint for $26 billion.
Originally, the companies planned to merge in 2014 but felt that under the Obama administration the merger would be shut down. Both companies feel that they have a better shot of pulling it off under the Trump administration. If both companies merge, then that will create a new contender better capable of taking on AT&T and Verizon. It is unknown how U.S. regulators will view the merger, as the mobile telecommunications market in the U.S. has little competition. Reducing the number of companies active in the sector only strengthens that oligopoly. The first plan for the companies, if they are to merge, is to roll-out the first 5G network in the U.S. to what could potentially be 100 million customers.
As for the company’s structure, current T-Mobile CEO John Legere will run the company, with current COO Mike Sievert becoming COO and company President. Sprint CEO Marcelo Claure and SoftBank CEO Masayoshi Son will both sit on the company’s board. Deutsche Telekom will hold a 42% stake in the company, Sprint will hold 27%, and the rest is held by public shareholders. The combined company will have lower costs and greater economies of scale according to T-Mobile, and it will create thousands of American jobs. The company will be located in Bellevue, Washington.
While that’s all well and good, the deal will need to be approved by shareholders and cleared by regulators first. It’s unknown how exactly that will go down, but both companies are reasonably confident that it will go through.
Update 1: FCC chair approval
FCC chairman Ajit Pai says he will vote to approve the proposed merger between T-Mobile and Sprint after T-Mobile made new promises to speed up their 5G rollout.
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. The commitments made today by TMobile and Sprint would substantially advance each of these critical objectives.
Pajit goes on to say the merger would allow the companies to deploy 5G coverage to 97% of the US population within 3 years of closing the merger. 90% of the country would have access to speeds of “at least 100 Mbps” and 99% would have access to speeds greater than 50 Mbps.
Rural coverage is a big part of Pai’s statement. The 3-year plan mentioned above would cover “85% of rural Americans” and 90% within six years.
T-Mobile and Sprint have promised that their network would cover at least two-thirds of our nation’s rural population with highspeed, mid-band 5G, which could improve the economy and quality of life in many small towns across the country.
Pai also claims the companies have committed to offering in-home broadband products that will give “many American’s another option for home broadband service.”
In regards to the many concerns people have had about this merger, Pai says the companies have committed to not raise prices for at least 3-years and Sprint will sell off Boost Mobile to a 3rd-party if the merger is approved.
Now, a lot of commitments are being made to get this merger approved, and T-Mobile will be held to them.
It’s also important that the companies would suffer serious consequences if they fail to follow through on their commitments to the FCC. These consequences, which could include total payments to the U.S. Treasury of billions of dollars, create a powerful incentive for the companies to meet their commitments on time.
Voting will take place on June 15th for approval of the merger. It still needs approval from the Justice Department before it can finally close.
Update 2: DOJ may disapprove
After the FCC’s chairman released a statement of approval, the Department of Justice is now said to be leaning against the merger. The FCC and DOJ rarely disagree on merger cases, but the DOJ considers a different standard. They are concerned with how the deal hurts competition and whether it would raise prices for consumers. It’s also worth noting that the Department of Justice rejected the previous Sprint/T-mobile merger attempt.
Update 3: DOJ against
It was widely reported on Monday that the Department of Justice was leaning against the Sprint/T-Mobile merger. The department has now recommended blocking the merger, according to sources at CNBC. The decision is reportedly expected in a month and it will likely put an end to the merger plans, at least this time.
Update 4: Amazon interested in Boost Mobile
Boost Mobile was a part of T-Mobile and Sprint’s proposed plan to the FCC. If approved, they would be required to sell Boost to a 3rd-party as part of their agreement. The Department of Justice was reportedly against the merger. The companies are continuing to meet with the department and potential bidders are preparing offers for Boost. The carrier is reportedly valued at up to $3 Billion.
One name that has popped up as a potential buyer is Amazon. They are reportedly interested in Boost because it would allow them to use “New T-Mobile’s” network for 6 years. Amazon has not commented on the story, but this would certainly be an interesting development.
Update 5: Justice Department approves
After a few bumps and hurdles, the Sprint/T-Mobile merger is officially approved and moving forward. The Department of Justice was the last federal agency that needed to approve of the merger. The DOJ finally approved the deal after Dish agreed to acquire Boost Mobile, Virgin Mobile, Sprint’s prepaid business, and “certain” spectrum assets.
Sprint and T-Mobile will be required to provide at least 20,000 cell sites and hundreds of retail locations to Dish. T-Mobile is also required to give Dish “robust” access to its network for 7 years while Dish builds out its 5G network. It’s important to the DOJ to maintain four major carriers in the US. They are ensuring that Dish has the assets to fill that role.
“With this merger and accompanying divestiture, we are expanding output significantly by ensuring that large amounts of currently unused or underused spectrum are made available to American consumers in the form of high quality 5G networks.”
The official FCC vote still has to take place, but the chairman has already voiced his support for the merger and said he would vote to approve the deal. On top of that, several state attorneys, including New York and California, have filed a lawsuit to block the deal. There are still some roadblocks ahead, but today’s news is a major step.
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