TR Daily Federal Judge Approves T-Mobile-Sprint Merger
Tuesday, February 11, 2020

Federal Judge Approves T-Mobile-Sprint Merger

A federal judge in New York today cleared the way for T-Mobile US, Inc., to acquire Sprint Corp., rejecting the argument of states that the deal would hurt competition in the wireless market and consumers.

“Having been tasked with predicting the future state of the national and local RMWTS (retail mobile wireless telecommunications services) Markets both with and without the merger, and relying on both the evidence at trial and the various judicial tools available, the Court concludes that the Proposed Merger is not reasonably likely to substantially lessen competition in the RMWTS Markets,” Judge Victor Marrero of the U.S. District Court for the Southern District of New York wrote in a 173-page opinion in “State of New York et al. v. Deutsche Telekom AG et al.” (case 19-cv-05434). “Despite the strength of Plaintiff States’ prima facie case, which might well suffice to warrant injunction of mergers in more traditional industries, a variety of considerations raised at trial have persuaded the Court that a presumption of anticompetitive effects would be misleading in this particularly dynamic and rapidly changing industry. T-Mobile has redefined itself over the past decade as a maverick that has spurred the two largest players in its industry to make numerous pro-consumer changes. The Proposed Merger would allow the merged company to continue T-Mobile’s undeniably successful business strategy for the foreseeable future.”

The judge continued, “While Sprint has made valiant attempts to stay competitive in a rapidly developing and capital-intensive market, the overwhelming view both within Sprint and in the wide industry is that Sprint is falling farther and farther short of the targets it must hit to remain relevant as a significant competitor.

“Finally, the FCC and DOJ have closely scrutinized this transaction and expended considerable energy and resources to arrange the entry of DISH as a fourth nationwide competitor, based on its successful history in other consumer industries and its vast holdings of spectrum, the most critical resource needed to compete in the RMWTS Markets,” Judge Marrero added. “DISH’s statements at trial persuade the Court that the new firm will take advantage of its opportunity, aggressively competing in the RMWTS Markets to the benefit of price-conscious consumers and opening for consumer use a broad range of spectrum that had heretofore remained fallow.”

But the judge added that he “remains fully mindful that among its various likely prospects, one possibility a merger of this magnitude raises is that of a less competitive future in the RMWTS Markets. However remote, that concern must be taken seriously. The Court, however, does not believe that such a possibility is reasonably likely in light of the numerous considerations discussed above. Accordingly, the Court concludes that Plaintiff States have failed to prove a violation of Section 7 [of the Clayton Act] and thus declines to enjoin the acquisition of Sprint by T-Mobile.”

Attorneys general from New York, California, Connecticut, Hawaii, Illinois, Maryland, Michigan, Minnesota, Oregon, Wisconsin, Massachusetts, Pennsylvania, Virginia, and the District of Columbia, led by the AGs of New York and California, argued that the merger would result in less competition in the wireless market, forcing consumers to pay more. Among other things, they questioned whether Dish Network Corp. would actually become a fourth nationwide competitor.

But T-Mobile and Sprint argued that the combined entity would better be able to compete with the two largest wireless carriers, Verizon Communications, Inc., and AT&T, Inc., resulting in lower prices, expanded 5G coverage nationwide, and a new alternative to in-home broadband service.

The trial lasted from Dec. 9 to Dec. 20 and closing arguments were held on Jan. 15.

T-Mobile’s planned acquisition of Sprint has already been approved by the FCC and the Department of Justice.

The FCC issued an order in November over the dissents of Democratic Commissioners Jessica Rosenworcel and Geoffrey Starks (TR Daily, Nov. 5, 2019). To get the deal approved, T-Mobile pledged to bolster its planned deployment of 5G services, including coverage of 99% of Americans within six years.

DoJ and some states reached a settlement with T-Mobile and Sprint last summer. Under the proposed settlement, the new T-Mobile is required to divest assets—including Sprint’s prepaid businesses, spectrum, towers, and retail operations—to enable Dish to become the fourth nationwide facilities-based wireless carrier (TR Daily, July 26, 2019). But a U.S. District Court judge in Washington has yet to complete a review of the settlement under the Tunney Act, although observers expect that the review will be completed soon.

T-Mobile and Sprint still must get sign-off on the deal from the California Public Utilities Commission.

“Today was a huge victory for this merger … and now 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,” said T-Mobile Chief Executive Officer John Legere, who is scheduled to step down at the end of April. “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.”

“This is a BIG win and a BIG day for the New T-Mobile! Now we can get to work finishing what we set out to do—bringing a new standard for value, speed, coverage, quality and customer service to U.S. consumers everywhere and TRULY changing wireless for good,” said T-Mobile President and Chief Operating Officer Mike Sievert, who will assume the CEO post in May. “Now we’re laser-focused on finishing the few open items that remain but our eye is on the prize: finally bringing this long-awaited merger and all the goodness it will deliver to a close as early as April 1, 2020. We are SO ready to bring the New T-Mobile to life!”

“Judge Marrero’s decision validates our view that this merger is in the best interests of the U.S. economy and American consumers,” said Sprint Executive Chairman Marcelo Claure. “Today brings us a big step closer to creating a combined company that will provide nationwide 5G, lower costs, and a high-performing network that will invigorate competition to the benefit of all mobile wireless and in-home broadband consumers. With the support of federal regulators and now this Court, we will focus on quickly completing the few remaining necessary steps to close this transaction.”

A news release by the carriers said the transaction “remains subject to certain closing conditions, including possible additional court proceedings, and satisfactory resolution of outstanding business issues among the parties.”

Dish Chairman and co-founder Charlie Ergen said, “We appreciate Judge Marrero’s thorough evaluation of this merger. The ruling, in addition to the DOJ and FCC approvals, accelerates our ability to deploy the nation’s first virtualized, standalone 5G network and bring 5G to America. We are eager to begin serving Boost customers while aggressively growing the business as a new competitor, bringing lower prices, greater choice and more innovation to consumers. We look forward to the Boost employees and dealers joining the DISH family. We want to thank the staff at the Department of Justice and the FCC for comprehensively investigating this merger and imposing a strong remedy that Judge Marrero concluded was timely, likely and sufficient.”

But New York Attorney General Letitia James (D.) said that the court ruling “marks a loss for every American who relies on their cell phone for work, to care for a family member, and to communicate with friends. From the start, this merger has been about massive corporate profits over all else, and despite the companies’ false claims, this deal will endanger wireless subscribers where it hurts most: their wallets. There is no doubt that reducing the mobile market from four to three will be bad for consumers, bad for workers, and bad for innovation, which is why the states stepped up and led this lawsuit. We disagree with this decision wholeheartedly, and will continue to fight the kind of consumer-harming megamergers our antitrust laws were designed to prevent. As we review our options, including a possible appeal, Americans should continue to hold the companies to account for their promises. I’d like to thank California Attorney General Becerra and the 12 additional attorneys general from around the nation for their partnership throughout this lawsuit, as well as the talented team of lawyers that put in countless hours fighting for this nation’s consumers.”

“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,” said California Attorney General Xavier Becerra (D.). “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.”

Today’s court decision also drew criticism from other parties that opposed the merger.

For example, the Rural Wireless Association said it “disagrees with Judge Marrero’s decision to approve this deal, which has been consistently and drastically altered from what was originally proposed in early 2018, and now includes Dish, a company that has zero experience operating as a facilities-based mobile wireless carrier network as the savior for wireless competition. The proposed ‘Dish Fix’ is an unartful attempt to remedy the competitive harms to the market place as Dish has limited assets and even fewer incentives to buildout its own network. This court has ignored the clear evidence from the record demonstrating the harm that will befall consumers, particularly rural consumers. With only some concessions by T-Mobile and Sprint to sell off parts of their business to Dish, the consolidation will result in the US having only three viable national wireless carriers, which in the long game will result in price increases for all consumers in the US.”

But FCC Chairman Ajit Pai welcomed the ruling.

“I’m pleased with the district court’s decision,” he said. “The T-Mobile-Sprint merger will help close the digital divide and secure United States leadership in 5G. After the merger, T-Mobile has committed to bringing 5G to 97% of our nation’s population within three years and 99% of Americans within six years. Its 5G network will also reach deep into rural areas, with 85% of rural Americans covered within three years and 90% covered within six years. This transaction represents a unique opportunity to speed up the deployment of 5G throughout the United States, put critical mid-band spectrum to more productive use, and bring much faster mobile broadband to rural Americans. I’m gratified that the federal district court agreed with the FCC and U.S. Department of Justice that this merger is lawful and should be allowed to proceed. This is a big win for American consumers.”

“So pleased that the deeply flawed state case against TMobile Sprint merger was rejected by the court,” tweeted FCC Commissioner Mike O’Rielly.

However, Commissioner Starks said, “The merger between T-Mobile and Sprint will dramatically alter America’s wireless landscape. The state Attorneys General presented a strong case. The court saw it differently. In particular, given how central DISH’s future role as a wireless competitor was to the court’s decision, I remain disappointed that those facts were not fully vetted in the merger [proposal] that I voted on. Nevertheless, the merging parties have made significant promises—to lower prices, to deploy 5G throughout the country, and to increase the diversity of their suppliers, employees and executives. Moreover, DISH has promised to build a 5G network from scratch in a few short years. I look forward to seeing how these companies will fulfill their promises to the American people.” —Paul Kirby, [email protected]

MainStory: Courts MergersAntitrust WirelessDeployment FCC FederalNews

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