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Home / Business / The merger of Sprint and T-Mobile is nearing the biggest hurdle

The merger of Sprint and T-Mobile is nearing the biggest hurdle



Until all parties agree on concessions, the Department of Justice will approve the deal by the end of this week or early next week, depending on who is familiar with the matter. The concessions would probably include the sale of Boost Mobile, Sprint's discount mobile service.

Negotiations are still ongoing, however, and the Justice Department is ready to bring litigation if the negotiations fail the source.

The Department of Justice declined to comment on this article.

The blessing of the Justice Department is a crucial advance for T-Mobile ( TMUS ) and Sprint ( S ) as they try to pool their forces against Verizon [1
94559005] ( VZ )
and AT & T, ( T [CNN]

The deal will not be final as soon as the Department of Justice has approved it: it still has to be approved by the Federal Communications Commission and a group of Attorney General.

Last week The Attorneys General of New York and California have filed a lawsuit seeking to block the proposed merger on Tuesday, along with seven other states and the District of Columbia. They said the merger of Sprint ( S ) and T-Mobile ( TMUS ) would lead to "less" competition and better returns for the network operators, "it states the lawsuit. States may need to agree to the concessions of the companies before they drop their lawsuit.
Last month, FCC Chairman Ajit Pai recommended that the deal be blessed after Sprint and T-Mobile revised the structure of the proposed merger.

To obtain Pai's blessing, the companies agreed to certain coverages. Including download speeds of 100 megabits per second (equivalent to fast broadband speeds at home) available to about 66% of Americans within three years of signing the contract. The companies committed to building a 5G network within six years of the merger. They promised that this network will also include coverage for some rural Americans, and they said the new company will offer an in-home broadband product.

Sprint also agreed to divest Boost Mobile, and this new company promises to make better deals than the prices currently offered by T-Mobile or Sprint for three years after the contract's conclusion. The companies agreed to impose FCC fines of up to $ 2.4 billion if they breached the agreement. The agency often looks skeptically at deals where direct competitors connect.

Opponents said the merger would eventually lead to a deterioration of competition and higher prices. The decision to agree to the deal shows how federal regulators have become more willing to accept consolidation in the mobile industry, which is dominated by a handful of massive players.

Although it has never become an official policy, the US government has repeatedly stated that the country is doing better when there are at least four national mobile operators. In 2011, this logic sparked opposition from the FCC and the Department of Justice against AT & T's planned acquisition of T-Mobile. The agencies were similarly critical when Sprint tried unsuccessfully to take over T-Mobile in 2014.

Now, both regulators seem to be more open to changes in this approach. In the Justice Department, cartel chief Makan Delrahim has argued that there is no "magic number" of competitors guaranteeing a healthy market.

Typically, the Department of Justice and the FCC are coordinating their merger announcement, market research firm New Street Research said in a memo to investors last month. But in this case, it was said, the FCC seemed to be shaking hands long before the Ministry of Justice was ready. It's not clear why the FCC did this, but it could have been calculated to urge Delrahim to approve the deal, New Street added.

"The FCC majority effectively approved a pending deal before the DOJ had made its decision before a The staffing document analyzing the transaction was presented to the Commissioners and before the public was given any information or opportunity to comment on the commitments that were made

Why Sprint and T-Mobile Want to Pool Their Powers

The American mobile market is extremely saturated with Verizon and AT & T dominating the industry

Following the spin-off of Boost Mobile, T-Mobile and Sprint can control 127 million mobile subscribers, compared to 156 million from AT & T and 118 million from Verizon.

Companies have been trying to unite for years to the capital-intensive industries with annual entertainment and expansion food in the tens of billions. Verizon and AT & T both started 5G networks, and Sprint and T-Mobile are lagging behind. When they are merged, they can pool resources to cut costs and build a 5G network for customers faster.

Sprint and T-Mobile have previously talked about a merger. However, they dispelled it in 2014 because of concerns from the Obama administration about regulatory challenges.

In 2017, they started talking publicly about a merger just to announce that they had stopped talking later that year. In April 2018, however, they announced their latest merger attempt.

What's next?

The Department of Justice's decision to approve the merger of Sprint and T-Mobile removes a remaining roadblock that requires federal approval. However, the ongoing lawsuit against the state could complicate matters.

California, New York, Wisconsin and a handful of other states have said the merger is anticompetitive because it eliminates a rival and could allow the remaining states to raise prices in lockstep. T-Mobile has promised not to raise prices for at least three years after the contract was signed, but states have stated that these and other commitments are insufficient to limit the potential damage to competition.

Participating States Are Home to So Many T-Mobile and Sprint Customers Find That the lawsuit poses a significant challenge to corporate plans, said Gene Kimmelman, a former Justice Department antitrust official who now heads Public Knowledge Consumer Protection Organization, which opposes the merger.

"If states win the lawsuit, I have to believe the deal is falling apart," he said. "The deal would be practically dead."


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