One Step Closer to a Massive Wireless Merger

Written by Jennifer Clark
Posted February 12, 2020

The U.S. wireless industry is about to see some massive changes. On Tuesday, a federal judge in New York approved a $26.5 billion merger between T-Mobile (NASDAQ: TMUS) and Sprint (NYSE: S). 

Now four cellphone giants have become three cellphone giants. This merger creates a large rival for AT&T (NYSE: T) and Verizon (NYSE: VZ), the other two giants. 

T-Mobile’s CEO John Legere said, “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.” Though the deal was struck two years ago, it had been delayed due to a challenge from 13 states and the District of Columbia aiming to block the deal over concerns that it was anticompetitive.

The U.S. Justice Department and Federal Communications Commission had approved the deal last year, but the challenge to the merger went to trial in December. Judge Marrero believed that the states brought a strong case that could have been enough to warrant a merger injunction if it was in any industry other than the wireless industry. 

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The judge felt that because the wireless industry is fast changing, the merger between T-Mobile and Sprint doesn’t pose a threat. Judge Marrero said:

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.

It’s true; T-Mobile has completely redefined itself in the last decade. I remember when T-Mobile's service was a joke and customer service horror stories abounded. A lot of that has changed. The company has offered new incentives to bring in customers and keep its current ones. Revamped stores (once dull, now bright and pink) have made its brand stand out. 

T-Mobile and Sprint have spent more than seven years trying to form some type of partnership. It wasn’t until 2018 that their boards came up with a deal that allowed T-Mobile to take over Sprint to create a company that would be closer to the size of Verizon and AT&T. 

New York State Attorney General Letitia James stated that the states disagree with the court’s decision and will review their options. Additionally, she said, “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." Any other action against this merger is unclear at this time.

As of right now, T-Mobile and Sprint have said that they will try and close the deal as early as April 1. While T-Mobile customers will remain unaffected, it might be a little complicated for current Sprint customers who will be transferred to T-Mobile plans. However, customers of Sprint’s prepaid brands — Boost Mobile, Virgin Mobile, and Sprint Prepaid — will become customers of Dish Network. That was one part of the deal that made it acceptable in the court’s eyes. 

Federal Communications Commission Chairman Ajit Pai said that he was “pleased” with the decision:

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 merger also leaves the opportunity for T-Mobile to expand its 5G efforts — something the U.S. and the Trump administration are keen on doing. This merger could help ensure that a widespread 5G network will be possible in the next few years.

Until next time, 

Jennifer Clark
Pro Trader Today
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