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FCC Chairman Backs T-Mobile, Sprint Merger With New Conditions

FCC Chairman Ajit Pai gave a thumbs-up to T-Mobile and Sprint’s proposed $26 billion merger, after the companies committed to enhanced 5G buildout commitments and agreed to spin off Sprint’s Boost Mobile.

T-Mobile and Sprint first announced their plans to merge in April 2018, looking to combine forces to take on industry leaders AT&T and Verizon. To clear regulatory hurdles, the companies have been forced to make additional guarantees. Those include a commitment to deploying a 5G network that would cover 97% of the U.S. population within three years of the closing of the merger and 99% within six years.

The deal still requires other regulatory approvals — including antitrust clearance from the Justice Department, which was “leaning against” approving the T-Mobile/Sprint merger because the concessions as outlined to the FCC didn’t go far enough to address competition concerns, Bloomberg reported Monday, citing an anonymous source. That was followed by comments by Robert McDowell, a former FCC commissioner working as T-Mobile’s regulatory counsel, who expressed confidence in an interview with Fox Business that “the DOJ will give this the green light.”

The reports whipsawed the carriers’ stock prices. In morning trading, after Pai’s endorsement, Sprint shares climbed more than 20% Monday and T-Mobile’s stock price was up around 5%. Shares of both companies dropped on the Bloomberg report; Sprint closed up 18.8% and T-Mobile up 3.9% for the day.

In addition, the revised T-Mobile/Sprint plan guarantees that their 5G network would reach deep into rural areas, with 85% of rural Americans covered within three years and 90% covered within six years. T-Mobile and Sprint also have promised that 90% of Americans would have access to mobile broadband service at speeds of at least 100 megabits per second and 99% would have access to speeds of at least 50 Mbps.

In another new commitment, the combined T-Mobile/Sprint pledged to roll out an in-home 5G broadband product including to rural households. Within three years, the “New T-Mobile” will market in-home broadband service to at least 9.6 million eligible households, of which at least 2.6 million will be in rural areas. Within six years of the closing, the combined entity will market in-home broadband service to at least 28 million eligible households, of which 5.6 million are rural households.

The companies also agreed to divest Sprint’s Boost Mobile prepaid division within 120 days of the closing of the merger, a move designed to address potential competitive issues in the prepaid wireless segment. And the companies pledged that new T-Mobile will not terminate Sprint’s reseller agreement with cable operator Altice upon closing and that the merged entity “will engage in good-faith negotiations to expand the existing agreement between Sprint and Altice to the New T-Mobile 5G network,” according to an 8-K filing by T-Mobile.

T-Mobile and Sprint had already committed to not to raise prices for three years following their merger.

According to Pai’s office, in the next few weeks he will distribute a draft order to the FCC’s other commissioners that would clear the merger. Also Monday, FCC Commissioner Brendan Carr — who, like Pai, is a Republican appointee — announced his support of the revised T-Mobile/Sprint merger plan.

“In light of the significant commitments made by T-Mobile and Sprint as well as the facts in the record to date, I believe that this transaction is in the public interest and intend to recommend to my colleagues that the FCC approve it,” Pai said in a statement. “This is a unique opportunity to speed up the deployment of 5G throughout the United States and bring much faster mobile broadband to rural Americans. We should seize this opportunity.”

Under the revised terms of the merger submitted with the FCC, the companies would “suffer serious consequences” — including billions of dollars in financial penalties — “if they fail to follow through on their commitments to the FCC,” according to Pai.

Consumer-advocacy group Free Press criticized Pai’s blessing of the T-Mobile/Sprint deal, arguing that the new concessions do not include anything to make wireless service more affordable.

“The digital divide the FCC should focus on is the affordability crisis,” Free Press VP of policy and general counsel Matt Wood said in a statement. “It leads to an adoption gap that makes it hard for poorer people to get online, and it keeps people of color disconnected more often than other demographic groups. People who rely on prepaid services won’t see any benefits from the conditions the FCC is touting with such glee this morning.”

The FCC opened a proceeding to consider the T-Mobile/Sprint transaction on June 15, 2018.

Pictured above: T-Mobile CEO John Legere (l.) pretends to write on the face of Sprint executive chairman Marcelo Claure at a House Judiciary subcommittee hearing about their companies’ proposed merger in March 2019.

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