T-Mobile and Sprint merger nears completion after federal judge approval
After at least half a decade of rumour, conjecture and court appearances, T-Mobile and Sprint’s on-again, off-again, on-again merger has cleared a considerable hurdle following a ruling by a New York federal judge.
The announcement was made as Southern District of New York judge Victor Marrero dismissed a legal challenge by several state attorneys general regarding anti-competition fears.
In his ruling, Marrero noted: “Having been tasked with predicting the future state of the national and local 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 markets.
“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.
“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 wider industry is that Sprint is falling farther and farther short of the targets it must hit to remain relevant as a significant competitor,” Marrero concluded.
The FCC was on the side of the merger, with FCC chairman Ajit Pai publicly backing the deal in May. Following the ruling, Pai said: “The T-Mobile-Sprint merger will help close the digital divide and secure United States leadership in 5G. I’m gratified that the federal district court agreed with the FCC and US Department of Justice that this merger is lawful and should be allowed to proceed.
“This is a big win for American consumers,” Pai added.
Naturally, T-Mobile’s reaction was not lacking in enthusiasm. “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,” said T-Mobile CEO John Legere in a statement. “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.” Marcelo Claure, chief executive of Sprint, added that the ruling “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.”
It is worth nothing the various steps, both forward and back, taken to get to this point. As far ago as 2014 Sprint, then the third-largest US carrier, and its parent SoftBank called off its bid to acquire T-Mobile citing regulatory resistance. On the very same day, Sprint announced Claure was to take over the hotseat, replacing Dan Hesse.
By September 2017, as T-Mobile began to register more subscribers than Sprint – 36.2m and 31.5m for Q217 respectively – rumours again circulated, with JPMorgan valuing the proposed deal at $88 billion. Two months later, the romance was off, with the companies ‘unable to find mutually agreeable terms.’ SoftBank upped its stake in Sprint as a result.
In April 2018, the companies announced an agreement to merge, with the deal being quoted at around $24.6 billion. Six months after that, analysts from Wells Fargo increased confidence in a merger going ahead, with a note to investors saying checks ‘continue to indicate that S/TMUS… remains fairly drama-free thus far.”
Amid occasional wobbles, 2019 saw the real groundwork being put in place: approval from the FCC in May; a ‘rough’ agreement with the Department of Justice (DoJ) at the start of July regarding cable provider Dish, finally stamped into place at the end of the month. October saw the FCC formally approve the merger in a 3-2 vote, with official – albeit conditional – approval arriving the month after.
With regards to Dish, the merger will see the company take the remaining place as the fourth US carrier based on its ‘successful history in other consumer industries and its vast holdings of spectrum.’ “Dish’s statements at trial persuade the court that the new firm will take advantage of its opportunity, aggressively competing in the markets to the benefit of price-conscious consumers and opening for consumer use a broad range of spectrum that had heretofore remained fallow,” wrote Marrero.
Sprint’s stock rose more than 70% in initial trading following the announcement, with T-Mobile shares going up by 12% in early trading. The deal is not yet finally closed; the California Public Utilities Commission is yet to rule on the transaction.
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