After a months-long battle between several states and the third and fourth-largest U.S. wireless carriers, Judge Marrero from the District Court in Manhattan has finally ruled in favor of T-Mobile’s $26 billion acquisition of Sprint, potentially clearing the last hurdle for the wireless carrier mega-merger.
Before we get to the impacts of the decision, it’s probably best to do a quick recap of how we got here. Back in July of 2019, the DOJ gave its approval for the $26.5 billion merger between T-Mobile and Sprint after negotiating a deal that would require T-Mobile/Sprint to divest a portion of its pre-paid wireless businesses (such as Boost Mobile) and some its wireless spectrum holdings to Dish Network, with the goal to keep the number of major U.S. wireless carriers at four.
Then in November, the FCC followed suit with its own approval for the merger, and with the green light from the two key regulatory bodies overseeing the deal, it seemed like an eventual merger between T-Mobile and Sprint was just a matter of time.
However, almost immediately after the merger was first approved by the DOJ, thirteen states sued to block the merger (including big states like NY, CA, and others), with the general argument against the merger being that it would reduce competition and therefore hurt wireless consumers across the country.
So a few weeks after T-Mobile CEO John Legere announced he would be stepping down, a trial began in early December pitting T-Mobile against Sprint and 13 states (plus the District of Columbia) to potentially determine once and for all if the deal would go through.
T-Mobile and Sprint claim that without a merger, Sprint would not be able to stay in business and that by not allowing the two to merge, the U.S. would still find itself with just three major wireless providers after Sprint’s eventual demise. That said, it seems not everyone in T-Mobile and Sprint’s camp is on board with that train of thought, with Sprint executive chairman Marcelo Claure testifying in the trial that he didn’t “necessarily agree” that Sprint couldn’t continue to exist as a standalone company.
Additionally, by merging, T-Mobile would be able to combine its vast sub-6GHz spectrum and mmWave coverage with Sprint’s 2.5-GHz holdings to create a more robust combined 5G network with both massive coverage and super-fast data speeds. T-Mobile has also promised that if the merger goes through, New T-Mobile will not charge extra for 5G service (compare to standard 4G plans) and will not raise the price of its plans for three years.
On the other side, the states believe that even with the acquisition of additional spectrum and T-Mobile and Sprint’s former pre-paid businesses, Dish would not be a viable fourth major wireless carrier, and would thereby decrease competition across the industry. And that’s even with T-Mobile also agreeing to allow Dish to piggyback off of New T-Mobile’s network for at least seven years if the merger does get approved.
The big fear is that with Dish in its infancy as a wireless provider, the U.S. would effectively have three major nationwide carriers, which would result in a similar competitive landscape to how things are in Canada, which has some of the highest mobile data prices of any country in the world.
Then, in early January, Sprint decided to move all Virgin Mobile users over to Boost Mobile in order to consolidate its pre-paid wireless offerings and meet the demands of the DOJ, before being sold off to Dish. And while all of this was going on, T-Mobile went ahead and launched its nationwide 5G network delivering sub-6GHz coverage to around 60 percent of the U.S.
Finally, during closing arguments that took place on January 15th, U.S. District Court Judge Victor Marrero heard closing arguments from both parties. According to Bloomberg, in their closing statement, the states’ maintained that the merger would harm competition by giving nearly 40 percent of the wireless market to New T-Mobile, and would, therefore, violate antitrust laws. The states’ lawyer Glenn Pomerantz also argued that this would allow New T-Mobile to raise prices by up to $4.6 billion and that even without the merger, Sprint will still be an effective competitor.
Pomerantz concluded by addressing Judge Marrero and saying “Your honor, there’s absolutely no reason to take that risk, we have only four national competitors and we need all of them.”
Alternatively, in the closing statement for the two carriers, T-Mobile argued that by merging with Sprint, it will be able to steal customers from AT&T and Verizon, forcing its rivals to lower their prices, thereby creating more competition, not less.
In court, T-Mobile lawyer David Gelfand told judge Marrero that “When a merger brings together two companies — that creates lower costs, better product — that actually makes the transaction pro-competitive.” T-Mobile CEO John Legere also told the court that if the merger was not approved, Sprint would be “sold for parts,” which would effectively reduce the number of nationwide carriers to three.
Now, Judge Marrero has sided with T-Mobile and Sprint and ruled in favor of the mega-merger, paving the way for the creation of New T-Mobile who will now account for more than 100 million wireless customers.
New T-Mobile is expected to be helmed by current T-Mobile COO Mike Sievert, who will be taking over for current T-Mobile CEO John Legere who will remain the board of directors. However, looking forward, it’s currently unclear how long it will take for T-Mobile and Sprint to fully divest parts of their wireless holdings to Dish before officially joining forces as New T-Mobile. And it’s unclear if the promises of increased competition and reduced prices will be anything more than rhetoric.