T-Mobile US Inc’s $26 billion acquisition of rival Sprint Corp won the support of the head of the Federal Communications Commission (FCC) on Monday, May 20, 2019 in a big step toward the deal’s approval.
FCC Chairman Ajit Pai, a Republican, came out in favor of the combination after the companies offered several concessions, including selling Sprint’s Boost Mobile prepaid cell service.
Sprint stock jumped 23.5% to $7.64 and T-Mobile was up 5.3% to $79.33.
If the purchase is completed, the number of U.S. wireless carriers would drop to three from four, with Verizon Communications Inc and AT&T Inc leading the pack.
Some telecommunications experts predicted that prices for cell phone service would rise as a result.
Pai will recommend that the other four commissioners vote to approve the merger. Commissioner Brendan Carr, a Republican, said Monday he will vote for the deal.
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Jessica Rosenworcel, one of two Democrats on the commission, tweeted her disapproval. “We’ve seen this kind of consolidation in airlines and with drug companies,” she said. “It hasn’t worked out well for consumers. But now the @FCC wants to bless the same kind of consolidation for wireless carriers. I have serious doubts.”
The FCC will not formally vote on the merger on Monday but will first draft an order, two people briefed on the matter said.
The Justice Department must also approve the deal.
In a filing with the FCC on Monday, the companies pledged to sell Boost Mobile, a prepaid wireless provider. The sale will include the brand name, any active accounts and “dedicated” Boost assets and staff but no wireless radio spectrum.
One long-time critic of the deal called the concessions “weak.”
“I don’t understand how the mere spinning off of one of three prepaid services would satisfy him (Pai), given all the evidence in the record that post-paid (wireless) prices will go up,” said Gigi Sohn, who held a senior FCC position during the Obama administration. “I just think this is very weak tea.”
The sale of Boost is aimed at resolving concerns that the deal would give the combined company 54% of the prepaid market, which generally includes those with poor credit who cannot pay with a credit card.
Altice USA, the fourth largest U.S. cable television company, has urged the FCC to reject the deal because it was concerned the combined company could prevent it from offering phone service.
Altice has an agreement with Sprint, which is about 84 percent owned by Softbank Group Corp, that would allow it to start offering mobile phone service later this year, using Sprint’s network. The companies pledged they would not scrap the deal with Altice.
T-Mobile, which is about 63 percent owned by Deutsche Telekom AG, also promised the new company would build a “world-leading” 5G network, which is supposed to be the next generation of wireless service. It promises to give rural Americans robust 5G broadband and enhance home broadband.
The FCC and Justice Department were expected to make a decision in early June. They have been weighing whether the deal will result in a potential loss of competition and higher prices for consumers, against the prospect of a more powerful No. 3 wireless carrier that can build a faster, better 5G network.
T-Mobile has about 80 million customers and Sprint about 55 million customers.
Yetunde Adegoke (Reuters)
