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T-Mobile and Sprint May Have to Create Fourth Competitor to Win Merger Approval

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Image for article titled T-Mobile and Sprint May Have to Create Fourth Competitor to Win Merger Approval
Photo: Sam Rutherford (Gizmodo)

Right now, most estimates of a T-Mobile/Sprint merger getting approved say its a coin flip. That’s because while FCC Chairman Ajit Pai has given the deal his blessing, the Justice Department still hasn’t signed off. And according to a new report from Bloomberg that cites a source close to the matter, it seems the Justice Department might have one more major condition that T-Mobile and Sprint will need to meet before approving the $26 billion merger of the two telecom giants.

That condition is so big that depending on the specifics, it alone could kill the deal. That’s because in addition to conceding to the FCC’s demands that a merged T-Mobile/Sprint would sell off Boost Mobile, commit to building out 5G infrastructure in rural areas, and not raise prices for three years, the Justice Department is also reportedly considering asking T-Mobile/Sprint to spin off a full-on fourth national wireless carrier to replace the void left by the merger.


The goal of this demand is to prevent the U.S. from becoming a three-carrier country, which would decrease competition between carriers and potentially raise the price of phones plans nationwide. This is a concern backed up by recent data that compared the high price of cellular data in the U.S. and Canada (which only has three national carriers) to the cheaper plans generally available across Europe.

However, because the Justice Department hasn’t made its demands official, the feasibility of asking T-Mobile and Sprint to create a fourth carrier is still undetermined. If the Justice Department really does require this new carrier to operate its own network, the resources, equipment, and spectrum needed to make that happen could cost billions, and be so onerous that it basically eliminates the value of the merger in the first place. And unfortunately, we won’t really know how that will affect the merger until the Justice Department spells out any new demands in greater detail.


That said, with T-Mobile and Sprint having recently extended the deadline for finalizing the merger until June 29th, we should get a better idea of whether the proposed deal has a chance of happening or not pretty soon. But for a merger that at one time seemed like it was going to sail through largely without issue, the hurdles T-Mobile and Sprint need to clear before combining seem to keep getting higher.