Federal judge rejects states’ concerns that combined company will hurt consumers
T-Mobile took a significant step forward this week in its long-anticipated $26.5 billion acquisition of rival wireless carrier Sprint when a federal court judge rejected arguments from states that the merger would be bad for consumers by hurting competition and driving up prices.
The Lowdown: The ruling by U.S. District Court Judge Victor Marrero in favor of the deal means that T-Mobile and Sprint have only a few perfunctory hurdles – including usual closing conditions and possible future court proceedings – to clear before completing the merger, which T-Mobile officials said could happen by April 1.
The Details: Attorneys general from 12 states ranging from Hawaii and Oregon through Illinois and Michigan to Massachusetts and New York – plus the District of Columbia – sued to stop the proposed merger, which was announced in 2018. They argued that combining the world’s third- and fourth-largest carriers would reduce competition, which would lead to higher prices and poorer service for consumers.
In his ruling this week, however, Marrero disagreed, saying that a reinvigorated T-Mobile under CEO John Legere over the past several years had put pressure on the top two carriers, AT&T and Verizon, to make changes that benefited consumers. The judge also noted that Sprint in recent years has continued a slide that could make it irrelevant as a major competitor in the future.
In order to get the U.S. Justice Department to approve the deal – which happened in July 2019 – T-Mobile and Sprint reached an agreement with Dish Networks with the goal of making it a fourth major carrier, a critical point for federal carriers that were concerned about having only three top carriers. Part of that deal called for Dish paying about $5 billion for Sprint’s Boost Mobile pre-pay service and wireless spectrum assets.
Given the approval by the Federal Communications Commission a couple of months earlier and then the DOJ OK, a resolution to the lawsuit was crucial for enabling the deal to go forward.
The Impact: The judge’s ruling means that a combined T-Mobile/Sprint will hit the market just as the ramp to 5G networking gets underway, giving AT&T and Verizon a much stronger competitor in that area. Marrero reportedly is requiring that the new and improved T-Mobile have 97% 5G coverage in the United States within the next three years, which would benefit consumers in both urban and rural areas.
According to Statista, in the third quarter last year, AT&T and Verizon held almost 70% of the telecom market. A combined T-Mobile and Sprint would account for much of the remaining 30%. That will be important in a 5G space that’s expected to grow from $784 million last year to more than $47.7 billion by 2027, according to a report from ResearchAndMarkets.
Background: The expected completion of the Sprint merger essentially will mark the end of Legere’s leadership at T-Mobile. The flamboyant executive who led the company’s turnaround from an afterthought in the wireless carrier space to a significant player announced last year that he would leave the company May 1, when his current contract expires, making way for current President and COO Mike Sievert to step into the role.
The Buzz: “Today was a huge victory for this merger and now we’re finally able to focus on the last steps to get this merger done,” Legere said. “We’ve said it all along: The New T-Mobile will be a supercharged Un-carrier that’s great for consumers and great for competition. The broad and deep 5G network that only our combined companies will be able to bring to life is going to change wireless, and beyond. Look out Dumb and Dumber and Big Cable – we’re coming for you. And you haven’t seen anything yet.”
“This is a big win and a big day for the New T-Mobile,” Sievert said. “Now we can get to work finishing what we set out to do, bringing a new standard for value, speed, coverage, quality, and customer service to U.S. consumers everywhere and truly changing wireless for good. Now we’re laser-focused on finishing the few open items that remain, but our eye is on the prize: finally bringing this long-awaited merger and all the goodness it will deliver to a close as early as April 1, 2020.”
“Judge Marrero’s decision validates our view that this merger is in the best interests of the U.S. economy and American consumers,” Sprint Executive Chairman Marcelo Claure said. “Today brings us a big step closer to creating a combined company that will provide nationwide 5G, lower costs, and a high-performing network that will invigorate competition to the benefit of all mobile wireless and in-home broadband consumers. With the support of federal regulators and now this Court, we will focus on quickly completing the few remaining necessary steps to close this transaction.”
“From the start, this merger has been about massive corporate profits over all else, and despite the companies’ false claims, this deal will endanger wireless subscribers where it hurts most: their wallets,” NY Attorney General Letitia James said in a statement. “There is no doubt that reducing the mobile market from four to three will be bad for consumers, bad for workers, and bad for innovation, which is why the states stepped up and led this lawsuit.”