T-Mobile’s $26.5 billion Sprint merger approved by federal judge

Reporter: Breana Ross
Published: Updated:

T-Mobile’s $26.5 billion takeover of Sprint has been approved by a federal judge, who rejected objections from a group of states that the merger could hurt consumers. The decision removes a major obstacle to a shakeup in the wireless industry.

After the deal closes, the number of major U.S. wireless companies would shrink from four to three. T-Mobile says the deal would benefit consumers as it becomes a fiercer competitor to the larger Verizon and AT&T.

But a group of state attorneys general tried to block the deal, arguing that having one fewer phone company would cost Americans billions of dollars in higher cell phone bills.

Judge Victor Marrero ruled Tuesday that while that concern was valid, the possibility of it happening was remote.

Marrero’s decision comes after the Justice Department already approved the deal. As part of a settlement with the Justice Department, T-Mobile agreed to help create a new, but smaller wireless competitor in satellite-TV company Dish.

The approval is “a victory for T-Mobile and Sprint,” wrote New Street Research analysts in a report sent to CBS MoneyWatch. “We genuinely believe that this deal paves the way for T-Mobile to fundamentally disrupt the U.S. wireless market. It eases the path for Dish to do the same.”

Another judge still needs to approve that settlement, a process that is usually straightforward but has taken longer than expected. A utility board in California also has to approve the deal.

Gigi Sohn, a fellow at the Georgetown Law Institute for Technology Law & Policy, said that while consumers are often promised benefits from mergers, “what they are left with each time are corporate behemoths who can raise prices at will, use their gatekeeper power to destroy competition and new voices and hijack regulatory and legislative processes.”

T-Mobile launched its bid for Sprint in 2018, after having been rebuffed by Obama-era regulators. T-Mobile CEO John Legere had seen President Donald Trump’s election and his appointed regulators as a good opportunity to try again to combine, according to evidence during the trial.

The deal got the nod from both the Justice Department and the Federal Communications Commission, thanks to an unusual commitment to create a new wireless player in Dish.

The Justice Department only allowed the deal after T-Mobile agreed to sell millions of Sprint’s prepaid customers to Dish, a satellite TV company with a shrinking customer base. T-Mobile also has to rent its network to the fledgling rival while it built its own. Dish is also required to build a faster, next-generation network, known as 5G, over the next several years.

The states had said that Dish wasn’t certain to succeed as a wireless company and was far smaller than Sprint, and the resulting wireless market would still be worse for consumers.

So what does this merger mean for you?

Company leaders are promising 5G network for all, 12,000 more jobs and lower prices for consumers.

“Part of the deal was that T-Mobile won’t raise its prices for its customers for the next three years, so everyone has built-in price protection,” said FGCU Economist Victor Claar.

He says even after that three year period, the new T-Mobile will have incentive to keep prices low for customers.

“Nobody wants to get in the way of the honeymoon effect. Nobody wants their first experience after the merger to be a terrible one because both T-Mobile and Sprint need to retain customers. Their viability depends on it,” he said.

That’s something that keeps some customers more optimistic.

A Sprint representative told us there will be no immediate changes for T-Mobile and Sprint customers as a result of the decision. The merger is still subject to other closing conditions and possibly more court proceedings before it’s finalized.

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