“It appears that the Sprint/T-Mobile merger has the blessing of FCC Chairman Pai, who also seems to have extracted some concessions around the so-called “Digital Divide” and 5G services. But overall, we have to believe this will be good for consumers, many of whom haven’t believed there’s a viable 3rd option for cellular service. A large issue still on the table is how the FCC can cajole cities and local government agencies to streamline regulations and standardize fees for 5G device installation. The required densification will make 5G look more like Wi-Fi, with radios every couple of hundred feet. If the 5G rollout gets mired in government bureaucracy, U.S. consumers will lose.”
Updated May 20, 2019 1:22 p.m. ET By Brent Kendall and Drew FitzGerald
WASHINGTON—Federal Communications Commission Chairman Ajit Pai said he would back the more than $26 billion combination of cellphone carriers T-Mobile US Inc. and Sprint Corp.after the companies agreed to a package of concessions.
The agreement assures one key government approval for the merger, though antitrust hurdles remain.
“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,” Mr. Pai said. “The commitments made today by T-Mobile and Sprint would substantially advance each of these critical objectives.”
The endorsement marks a departure from the stance taken by past FCC leaders who stood in the way of deals that would leave the U.S. wireless market with fewer than four nationwide competitors. The commission joined the Justice Department in 2011 by opposing AT&T Inc.’splan to buy T-Mobile, warning the merger would “significantly diminish competition.”
Mr. Pai’s FCC has taken a less rigid view of the wireless market. A staff report in 2017 found that the wireless business enjoyed “effective competition” as prices for mobile data kept falling.
On Monday, the FCC said the companies agreed to invest in new wireless broadband service, especially in rural areas, and to build new 5G infrastructure using Sprint’s licenses in the mid-band of the radio spectrum. The companies also agreed to sell Sprint’s Boost brand, a prepaid cellphone service with millions of customers.
Shares of Sprint rose 24% to $7.68 in midday trading Monday, while T-Mobile shares were up 5.7% to $79.65.
The companies, the third- and fourth-largest wireless providers in the U.S., need the blessing of two federal agencies to merge. Recent talks yielded an agreement with Mr. Pai, a Republican who leads the five-member regulator. He said Monday he plans to recommend the proposal to his fellow commissioners.
It still could take weeks for the FCC to write a formal order that offers the companies conditional approval.
An FCC agreement would be a notable boost for the companies, but it isn’t clear whether the concessions will help them at the Justice Department, which is considering whether the merger would harm competition. The department has been concerned about the transaction for months and told the companies in April that their deal was unlikely to get a green light from the department as it was structured, The Wall Street Journal reported last month.
It isn’t clear whether the Justice Department has had an opportunity to evaluate the concessions T-Mobile and Sprint made to the FCC. A Justice Department spokesman declined to comment.
The two agencies have different mandates under federal law. While the FCC considers whether a telecom deal is in the public’s interest, the Justice Department must decide whether it will harm competition. Some of the commitments T-Mobile and Sprint made to the FCC may not be relevant to the Justice Department’s calculus. And the department’s antitrust chief, Makan Delrahim, has said he doesn’t believe that so-called “behavioral” promises by companies on issues like pricing and product offerings are effective in protecting consumers when a merger threatens to remove a significant competitor from the marketplace.
The deal has also encountered opposition from some state attorneys general who have been considering their own antitrust lawsuit even if the Justice Department doesn’t challenge the deal.
The companies are slated to hold more meetings with Justice Department and state officials in the coming days, according to a person familiar with the matter.
The deal the companies offered the commission requires that they provide 5G service over mid-band frequencies that cover 75% of the U.S. population within three years, and charges the firms financial penalties if they fail to meet their targets. T-Mobile has said that Sprint’s ample mid-band spectrum assets were a key driver of their merger. Neither company would be required to shed spectrum licenses to win FCC approval.
The companies also agreed to an “infrastructure-based” agreement to provide the cellular network to support Altice USA Inc., which had opposed the transaction absent assurances it wouldn’t hurt the cable company’s fledgling wireless service.
Company representatives spent months working to persuade both agencies to bless their deal but expected the FCC to take the lead in settlement talks, according to people familiar with the matter. They figured the commission has more leeway to approve behavioral conditions that affect business operations than the Justice Department because of Mr. Delrahim’s prior criticism of such settlements.
Mr. Pai has also opposed past arrangements that allowed companies to merge as long as regulators police their conduct. As a commissioner, he criticized a deal that allowed Charter Communications Inc. to buy most of rival Time Warner Cable, saying in a dissenting statement that the agreement would be “micromanaging where, when, and how ISPs [internet service providers] deploy infrastructure.”
FCC officials said the latest wireless deal would be different because its provisions demand concrete steps to serve the public interest, like broader 5G coverage, or specific commitments to fix conditions that harm consumers.
Write to Brent Kendall at [email protected] and Drew FitzGerald at [email protected]
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