DOJ Says OK to T-Mobile-Sprint

But deal closing must await outcome of suit by states, says spokesperson for Calif.
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The Justice Department, five state attorneys general and T-Mobile-Sprint have reached an agreement on the proposed merger of the number three and four wireless carriers, conditioned on, among other things, the spin-off of Boost Mobile and some spectrum assets to Dish.

According to the settlement, "T-Mobile and Sprint must divest Sprint’s prepaid business, including Boost Mobile, Virgin Mobile, and Sprint prepaid, to Dish Network Corp., a Colorado-based satellite television provider. The proposed settlement also provides for the divestiture of certain spectrum assets to Dish. Additionally, T-Mobile and Sprint must make available to Dish at least 20,000 cell sites and hundreds of retail locations. T-Mobile must also provide Dish with robust access to the T-Mobile network for a period of seven years while Dish builds out its own 5G network."

“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,” said Delrahim of the settlement. “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....In crafting this remedy, we are also mindful of the significant commitments T-Mobile, Sprint, and Dish have made to the Federal Communications Commission.”

But due to an extant court challenge by other AGs, the deal won't close for months, and then only if the AGs don't win, according to a spokesperson from the California Justice Department.

Antitrust chief Makan Delrahim has long said he favors spin-offs to bring deals inside the antitrust ropes rather than behavioral conditions that must be continuously monitored, though there will be some of the latter as well.

The FCC's Republican majority has already signaled it can approve a deal with the Boost spin-off and other conditions the companies have volunteered. 

DOJ announced the deal, essentially filing suit and announcing the settlement at the same time, on Friday (July 26) after reports it could come earlier in the week, but had been delayed.

Still to be resolved is a lawsuit involving more than a dozen state attorneys general (including New York and California), who have sued in a New York District court to block the deal (a status conference is set for Aug. 1).

Related: Some State AG's Sue to Block T-Mobile-Sprint

That will push the deal's closing into late in the year or early 2020. 

According to a copy of the case scheduling order supplied by an official of California's Justice Department, T-Mobile and Sprint submitted a letter to the court saying: “Defendants agree not to consummate or otherwise complete the challenged transaction until 12:01 a.m. PT on the sixth day following entry of a final and appeal-able judgment, and only if the Court enters judgment in favor of Defendants or otherwise permits consummation of the challenged transaction.”

The trial isn't even scheduled to start until Oct. 7, and the states have asked for that date to be pushed back.

New York State Attorney General Letitia James signaled the states in that suit, which also include California, Colorado, Connecticut, the District of Columbia, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, Virginia, and Wisconsin, aren't ready to throw in the legal towel.

“Here in California and across our coalition of states, our concerns with this merger have been, are, and continue to be about the harms posed by over-consolidation and diminished market competition," said California AG Xavier Becerra, who didn't sound like he favored withdrawing the suit, either (California was a lead plaintiff), though he did add "intend" and "prepared" to his assertion they were still headed to court. "A marketplace with fewer active competitors drives up costs, reduces consumer choice and thwarts innovation. We intend to be prepared to go to trial to fight for a fair, competitive, and equitable marketplace for consumers nationwide.”

"Based on the information available to date, the states continue to have serious concerns with the merger and whether the deal with Dish will create a fourth independent competitor that addresses the loss to competition otherwise caused by this megamerger," James said.

And FCC Chairman Ajit Pai must still circulate his order approving the deal and given August vacations, it will be tough to get a final vote until September. Calling it a "ew deal," Democratic Commissioner Jessica Rosenworcel has already called for the chairman to let the public comment on that "new deal" before a vote, which the chairman is highly unlikely to do.

Even when the FCC does approve, opponents could challenge that decision in the D.C. federal appeals court, asking it to stay the FCC's decision until the state case is resolved. 

Pai has said that approving the deal is key to winning the race to 5G. One of the companies’ arguments for letting them get together was that they could do 5G faster than if they were apart.

The Trump Administration has made winning that race a national priority.

Altice USA had a rooting interest in the outcome.

"Based on our initial read of the Department of Justice's consent decree that extends Altice USA’s mobile deal and in light of T-Mobile’s commitments to the FCC to provide Altice USA with access to the New T-Mobile network inclusive of 5G services, we believe that the major concerns regarding the merger's impact on our wireless business have been addressed," the company said.

T-Mobile has pledged to honor Altice USA's MVNO and extend it to the new 5G network it will deploy. 

One critic didn't see the deal as creating a wireless competitor--Dish--to keep the market at four major players.

"This deal creates a faux competitor, not a real one, which is why I would bet on the states in their forthcoming court challenge," said Andrew Schwartzman of the Benton Foundation. "Dish is buying Boost, a brand which sells prepaid service to low end consumers. Dish will start with none of the lucrative postpaid customers, no brand name and no retail network. Even if Dish successfully builds out its own network, that could not happen for several years, during which time the three big wireless companies will be able to lock in their customer and introduce their 5G technologies. 

In other words, rather than having Sprint as a weak fourth competitor, the combined companies will now face an extremely weak fourth competitor. 

"One other thing frequently overlooked is that T-Mobile will actually benefit from having Dish as a wholesale customer. That means that it will be selling otherwise unused capacity for the next several years. Just as airlines are better off filling empty seats with discounted sales, so too, will T-Mobile will be able to operate its network more efficiently as a result."

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