Federal judge signs off on T-Mobile/Sprint merger

Decision day is finally here, and it has landed in T-Mobile and Sprint’s favor, as the companies secured a federal court win Tuesday to combine and become a new and larger U.S. wireless carrier.

U.S. District Judge Victor Marrero ruled Tuesday that T-Mobile and Sprint’s $26 billion merger should be allowed, disagreeing with a coalition of 14 state attorneys general (AGs) that sued to block the deal and had argued a combination of the nation’s third- and fourth-largest wireless carriers would harm competition and raise prices.  

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In his decision, Judge Marrero rejected the states’ objections on three key points: first, he was not persuaded by states' position that the combined company would pursue anticompetitive behavior that would create higher prices and lower quality wireless service, thereby lessening competition nationwide. Second he rejected arguments that Sprint could continue to operate as a strong competitor nationwide without the merger; and third, he declined to be swayed by states’ evidence that Dish Network wouldn’t be a viable new competitor in the wireless market or live up to its commitment to build out a nationwide wireless network.  

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As part of earlier merger-related concessions to secure DoJ approval, Dish had already agreed to acquire certain Sprint spectrum and prepaid assets, including Boost Mobile, and enter the wireless market as a fourth national competitor (conditioned on merger approval.) That includes an MVNO agreement enabling Dish to ride on T-Mobile’s network as the newcomer builds out its own nationwide 5G network.

In a deal process that has seen its share of setbacks since the merger was first announced in April 2018, T-Mobile and Sprint have cleared this latest and major hurdle, with T-Mobile CEO John Legere calling it a “huge victory.”

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“[N]ow we are FINALLY able to focus on the last steps to get this merger done! We want to thank the court for its thorough review of the facts we presented in our case. We’ve said it all along: the New T-Mobile will be a supercharged un-carrier that is great for consumers and great for competition. The broad and deep 5G network that only our combined companies will be able to bring to life is going to change wireless … and beyond,” said Legere in a statement.

In taking over Sprint, T-Mobile scoops up spectrum assets, including coveted 2.5 GHz spectrum, and has pledged, among other things, to help bridge the digital divide by building a nationwide 5G network with speeds as much as 15-times faster than LTE. It also has agreed not to raise rate plan prices for three years, and to provide an alternative to in-home broadband delivering 100 Mbps wireless broadband to 90% of the U.S. population by 2024.

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Analysts at LightShed Partners wrote Tuesday that the judge’s ruling is “clearly a big win for T-Mobile, which will now [have] a superior spectrum position which it can use to launch 5G and handle even higher growth.” LightShed analysts Walter Piecyk and Joe Galone called it a win for Dish as well, but not so much for competitor Verizon.

“It’s not great news for Verizon, given that it removes Sprint and Dish’s spectrum as an alternative, created a new competitor in Dish and has empowered T-Mobile with the tools to deliver a superior network experience to consumers,” wrote LightShed.

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Mike Sievert, T-Mobile’s COO and president who will take the helm as CEO this spring, said the company is now “laser-focused on finishing the few open items that remain, but our eye is on the prize,” and that they hope to close the merger as early as April 1.

The DoJ and FCC already signed off on the merger, though the California Public Utility Commission has yet to make a decision.

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“T-Mobile has not indicated whether it would close the deal without CPUC approval. However, it is very hard for us to believe that one state can hold up a national deal,” wrote LightShed analysts.

There is also still a chance the court drama is not completely over yet, as the coalition of states fighting could appeal today’s decision. California state AG Xavier Becerra, who alongside New York AG Letitia James led the 14 state attorneys general in the antitrust suit against the merger, indicated in a statement that the group may not be done fighting yet.

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“Our fight to oppose this merger sends a strong message: even in the face of powerful opposition, we won’t hesitate to stand up for consumers who deserve choice and fair prices. We’ll stand on the side of competition over megamergers, every time. And our coalition is prepared to fight as long as necessary to protect innovation and competitive costs,” Becerra said Tuesday in a statement responding to Judge Marrero’s decision.

Another step is T-Mobile potentially renegotiating Sprint’s sale price, which LightShed analysts have previously called for, after what became an extended approval process and based on Sprint’s poor business performance.

They noted that on T-Mobile’s quarterly earnings call last week, Legere said that if there was need for a change “we would handle that very swiftly after the deal was approved.”

Sprint shares jumped 70.4% Tuesday morning, while T-Mobile was up 9%, according to SeekingAlpha.