The merger of T-Mobile and Sprint, the third- and fourth-largest carriers in the U.S., has been close to happening for years — but will it ever?
In April 2018, T-Mobile CEO John Legere took to Twitter to officially announce the merger, saying the two companies “have reached an agreement.” He posted a video of himself alongside Sprint CEO Marcelo Claure that provided some details on the merger. And the mobile carriers submitted a formal application to the Federal Communications Commission on June 18, 2018, officially beginning the regulatory review process for the $ 26 billion deal.
The combined company would have more than 126 million customers, bringing it closer to rivals AT&T (141 million subscribers) and Verizon (150 million). The merger could also mean an improvement in overall 5G wireless technology, which promises greater, pervasive connectivity and faster speeds, but which involves costly and complicated development efforts.
We’ve got all the news and rumors to keep you up to date.
FCC Chairman Ajit Pai and Commissioner Brendan Carr back the Sprint-T-Mobile merger
The U.S. government’s objections to the merger between Sprint and T-Mobile are starting to evaporate as Federal Communications Commission Chairman Ajit Pai and Commissioner Brendan Carr both signaled their support for the merger. Their backing is based on the two companies’ promise of rolling out an extensive 5G network, commitment to accelerated in-home broadband access to currently underserved communities across the country and in rural areas, and promise of increased competition in the U.S. wireless market.
In a filing on May 20, T-Mobile outlined a binding commitment to building out its 5G network and to escalating broadband wireless services to rural America. The telecom giant promised to construct its network in remote and unserved areas and to provide communities with independently verifiable fiber-like speeds. The T-Mobile-Sprint combined company will sell Sprint’s Boost Mobile prepaid cellphone company and commit to rolling out a next-generation 5G network that covers 97% of the U.S. within three years of the merger, and 99% within six years. This 5G network would include rural areas, with 85% of rural Americans covered within three years and 90% covered within six years alongside a pledge to guarantee 90% of Americans access to mobile broadband at speeds of at least 100 Mbps and 99% access to speeds of at least 50 Mbps.
This got a favorable response from some regulators. Said Pai: “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 T- Mobile and Sprint would substantially advance each of these critical objectives.
“The companies have also taken steps to respond to concerns that have been raised about this transaction,” Pai stated. “… in addition to their prior commitment not to raise prices for three years, T-Mobile and Sprint have decided to divest Boost Mobile. This sale is designed to address potential competitive issues that have been identified in the prepaid wireless segment.”
The deal is not out of the woods yet, as the Justice Department must still approve it.
Report: Sprint and T-Mobile are considering concessions to save merger
With regulators skeptical that the Sprint-T-Mobile deal will be good for competition in the U.S., Sprint and T-Mobile are reportedly considering concessions to save the deal, according to Bloomberg, which cites people familiar with the matter. Perhaps the biggest and most important of these concessions would be the sale of their prepaid businesses, which would be a pretty major step for both of the carriers. Other possible concessions include selling some airwave licenses.
It makes sense Sprint would want to make concessions to get the merger approved. Sprint posted another drop in subscribers by 198,000, which is the company’s worst drop since 2015.
U.S. regulators may block the Sprint-T-Mobile merger
It seemed for a while like Sprint and T-Mobile were finally going to merge, but now it seems as though the deal could never happen. According to a report from The Wall Street Journal, the Department of Justice has warned both T-Mobile and Sprint that the deal is unlikely to be approved in its current iteration.
So why is the deal unlikely to go through? According to the report, regulators are concerned that the deal could end up harming competition in the wireless industry in the U.S., despite the fact that both companies insist that the deal would boost jobs and innovation. It’s currently unclear if the Department of Justice is seeking to kill the deal altogether, or if it simply wants changes to it.
If the merger were to go through, T-Mobile CEO John Legere would ultimately lead the combined company. After the report was published, Legere took to Twitter to refute it, saying that it was “simply untrue.”
The premise of this story, as summarized in the first paragraph, is simply untrue. Out of respect for the process, we have no further comment. This continues to be our policy since we announced our merger last year. https://t.co/3q9CVgkRfv key info: https://t.co/N5YvuuJtPZ
— John Legere (@JohnLegere) April 16, 2019
T-Mobile-Sprint merger could close in Q1 2019
The Sprint-T-Mobile merger could be sooner to closing than previously thought. According to T-Mobile Chief Financial Officer J. Braxton Carter, while the deal is likely to close in the second quarter of 2019, it’s possible that things could move along even quicker and the deal could close in the first quarter.
“The only remaining thing that is happening is depositions with the [Department of Justice], which have started and will be completed in a few weeks,” he said at a conference in Barcelona in mid-November. “At this point, it’s more pointing to the second quarter as more probable (but) it could still be first quarter.”
FCC needs “extra time” to review the T-Mobile/Sprint merger
On September 11, the FCC announced that it needed more time to review the proposed merger between T-Mobile and Sprint. In the announcement, it paused the 180-day timeline for reviewing the merger, creating yet another roadblock in what could be a long process for the deal.
The FCC didn’t give too many details, but it did say that it wanted more time to allow for “thorough staff and third-party review.”
FCC begins accepting petitions to deny the T-Mobile and Sprint Merger
On July 19, the commission announced that it was officially accepting petitions to deny the merger between T-Mobile and Sprint. Both petitions (which could be filed by anyone) to deny the deal and formal comments were due on August 27, and could be submitted on the FCC’s docket page — where you could also find a list of filings from others. From there, oppositions to the petitions were due on September 17 and replies on October 19. As for when a decision will be issued, the FCC created a 180-day timeline to review the merger but wasn’t required to give an answer once those days are up. In fact, now that it has paused that timeline, it’s unclear as to when we’ll hear a final decision.
T-Mobile and Sprint file Public Interest Statement with FCC
On Tuesday, June 19, both T-Mobile and Sprint announced the next steps have been taken in attempting to make the merger a reality — by filing its Public Interest Statement with the FCC. The PIS includes a variety of arguments by both Sprint and T-Mobile as to why the merger should be approved — starting with building a “world-class nationwide 5G network” that will surpass Verizon and AT&T.
The PIS also ensures the “New T-Mobile” will not only bring rural Americans better broadband coverage with improved signal quality and increased network capacity, but that consumers will also pay less and receive more. According to both carriers, customers could see a 55 percent decrease per gigabyte and 120 percent increase in cellular data supply.
Other arguments T-Mobile and Sprint include in the filing are ones made previously when the merger was first announced — job growth and innovation. By merging both companies, the New T-Mobile is said to create thousands of additional job opportunities. With a 5G network, the new carrier could help to fund and develop products or services that bring competition to what is already out there in the consumer market.
Announcing the merger
On Sunday, June 17, T-Mobile CEO John Legere tweeted a video announcing that Sprint and T-Mobile had agreed to form a new company. In a press release from the same day, the combined companies were given a value of $ 146 billion. The company’s ownership will be split three ways, with Deutsche Telekom owning 42 percent and SoftBank Group holding 27 percent. The remaining 31 percent will be publicly owned.
The new company will be named T-Mobile, and Legere will serve as the chief executive officer. Sprint CEO Marcelo Claure and SoftBank Group Chairman and CEO Masayoshi Son will serve on the board of the new company.
Before the deal can be finalized, it will have to be approved by the Justice Department, which will review it for antitrust violations. In June Reuters reported the Justice Department was interviewing smaller carriers and MVNOs to determine how the T-Mobile/Sprint merger could affect their businesses.
While the Justice Department blocked a similar deal between AT&T and T-Mobile on antitrust grounds, Legere appears confident this merger will be approved
“This isn’t a case of going from 4 to 3 wireless companies — there are now at least 7 or 8 big competitors in this converging market,” Legere said. “And in 5G, we’ll go from 0 to 1. Only the New T-Mobile will have the capacity to deliver real, nationwide 5G. We’re confident that, once regulators see the compelling benefits, they’ll agree this is the right move at the right time for consumers and the country.”
One of those “compelling benefits” is likely to be job growth. The new company promises to employ at least 200,000 people in the U.S. That number is expected to grow as the “New T-Mobile” — as the company is called in the press release — has pledged to invest $ 40 billion in infrastructure over the course of three years.
The other major promise is that 5G is coming for all. The New T-Mobile says it will be the only wireless provider with the capability to provide true 5G service. This, in theory, will force its competitors to invest in new technologies prompting the further spread of 5G.
“Going from 4G to 5G is like going from black and white to color TV,” Sprint’s Marcelo Claure said. “It’s a seismic shift — one that only the combined company can unlock nationwide to fuel the next wave of mobile innovation.”
The company is citing 15 times faster speeds on average by 2024 when compared to T-Mobile’s network today.
“5G for all will unleash incredible benefits and capabilities for consumers and businesses,” the release reads. “Imagine, for example, augmented reality heads-up displays that see everything you do, and provide real-time cloud-driven information about the people and objects around you. Imagine never losing anything again because low-cost sensors with decade-long battery life are embedded in everything you own. Imagine an earpiece providing real-time translation as a friend speaks to you in another language.”
T-Mobile and Sprint sat around a table in November 2017, when talks were said to have fallen apart due to an inability to agree on valuations. Before this, the two came close to merging in 2014, but the deal was cooled when concerns over antitrust were raised by President Barack Obama.
During the 2017 discussions, Legere said any merger would have to be in the long-term interests of shareholders. “We have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record.”
In turn, Claure echoed the sentiment: “While we couldn’t reach an agreement to combine our companies, we certainly recognize the benefits of scale through a potential combination … We are determined to continue our efforts to change the wireless industry and compete fiercely.”
During these merger talks in 2017, the carriers reportedly sought a merger without any asset sales, meaning each would keep the maximum amount of its respective “spectrum holdings and cost synergies … before regulators ask for concessions.” Such an approach could face serious questions from regulators as the Federal Communications Commission prohibits rival carriers from conspiring during airwave auctions. The carriers likely saw a very real concern that such a scheme could be rejected by antitrust regulators with the Department of Justice. Administration changes in both the Justice Department and FCC made such a rejection less likely, however.
“It is better for Sprint and T-Mobile to listen and learn the concerns of regulators first, and see whether there is anything that can be done to address those concerns,” MoffettNathanson research analyst Craig Moffett said of the impending deal.
Merging with the ‘Un-carrier’
While both companies will undoubtedly benefit from a merger, Sprint definitely had the most to lose if the talks had failed. The carrier has been playing subscriber catch-up with rival carriers AT&T, Verizon, and T-Mobile. T-Mobile is currently the third largest carrier in the U.S. with 72.6 million subscribers, while Sprint falls into a distant fourth place with around 53.6 million customers.
In addition to subscribers, Sprint continues to lag behind T-Mobile in terms of coverage as well. Earlier this year OpenSignal reported that Sprint was, once again, dead last in all of its categories for its State of Mobile Networks report.
Updated on May 20, 2019: FCC Chairman Ajit Pai and Commissioner Brendan Carr back the Sprint-T-Mobile merger.