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FCC chairman recommends approval of Sprint merger with T-Mobile, giving deal a boost

Sprint CEO addresses employee question: ‘What’s going to happen to Sprint?’

Sprint's new CEO Michel Combes helped kick off day two of Sprint's "Why Sprint Now" road show at the Sprint Center in June.
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Sprint's new CEO Michel Combes helped kick off day two of Sprint's "Why Sprint Now" road show at the Sprint Center in June.

Federal Communications Commission Chairman Ajit Pai on Monday recommended approval of the proposed $26 billion merger of Sprint and T-Mobile, giving the deal better prospects of clearing regulatory hurdles.

In a statement, Pai said that pledges by both companies to deploy fifth generation, or 5G, broadband speeds across most of the United States could meet an FCC priority of bridging the digital divide in rural America.

“This 5G network would also reach deep into rural areas, with 85% of rural Americans covered within three years and 90% covered within six years,” Pai said. “Additionally, T-Mobile and Sprint have guaranteed 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.”

Pai also noted that both Sprint and T-Mobile have made concessions to assuage regulatory concerns, including a commitment to not raise wireless fees for three years and to divest themselves of prepaid wireless brand Boost Mobile to give consumers another competitive option.

The two companies promised a rapid build out of its 5G network, seeking to cover at least two-thirds of the U.S. population with download speeds that exceed 100 megabits per second. Within six years of the merger closing, the companies said 90 percent of Americans could access such download speeds.

The companies outlined those concessions in a filing with the U.S. Securities and Exchange Commission on Monday.

The concessions appeared to help tilt Pai and another FCC commissioner toward favoring the deal.

Later on Monday, fellow FCC Commissioner Brendan Carr signaled his support for the deal.

“I support the combination of T-Mobile and Sprint because Americans across the country will see more competition and an accelerated buildout of fast, 5G services,” Carr said in a statement. “The proposed transaction will strengthen competition in the U.S. wireless market and provide mobile and in-home broadband access to communities that demand better coverage and more choices.”

Not everyone was pleased with the statements by the FCC commissioners. The Rural Wireless Association, an advocacy organization for rural telecommunications companies, cautioned against trusting T-Mobile promises.

“As RWA and numerous other parties have explained in the past, nothing T-Mobile says or promises with respect to rural America should be taken at face value,” the RWA said in a statement. “T-Mobile has a history of misleading the Commission — such as by overstating its rural coverage in the FCC’s Mobility Fund Phase II proceeding — and of ignoring its obligations to rural consumers — such as by failing to enter commercially reasonable bilateral roaming agreements and by failing to complete hundreds of millions of calls intended for rural America, for which it paid a $40 million-dollar (fine) in 2018.”

Even so, the FCC’s statements improve the chances that Sprint and T-Mobile can realize a long-sought goal of combining forces, although the Justice Department still can block the merger. The Justice Department reviews corporate mergers, often to assess whether the combination can pose antitrust concerns through the elimination or reduction of competition in the marketplace.

In 2011, for example, AT&T backed away from a proposed merger with T-Mobile after it became apparent that the Justice Department had misgivings about its effect on competition in the wireless market.

In April, reports surfaced that Justice Department officials were not keen on the Sprint and T-Mobile combination, citing erosion of competition in the wireless market should the bottom two of the four major wireless carriers merge. Bloomberg reported on Monday that the Justice Department is still leaning against the proposal, even after learning of the latest concessions.

Monday’s statements don’t signal a full FCC endorsement of the transaction. Pai and Carr are the only two of the five-member FCC commission to comment on the proposal.

John Legere, chief executive of T-Mobile, cheered Pai’s endorsement.

“I particularly want to thank Chairman Pai for his statement of support for these commitments and our merger — as well as his ongoing leadership to help ensure our country is a leader, not a follower, in the 5G era,” Legere said in a statement. “We look forward to continuing to meet and work with a variety of important stakeholders to demonstrate the powerful benefits the New T-Mobile will bring — but today’s filing is at the center of our plans to bring 5G to American consumers.”

Sprint employs about 6,000 workers in the Kansas City area where it has its headquarters campus in Overland Park. If the deal goes through, the companies have said that Overland Park would remain a secondary headquarters for the new T-Mobile company. T-Mobile is based in the Seattle area.

Sprint has pushed hard for a combination with T-Mobile, citing deep concerns about being able to continue as a standalone company given years of losses and withering competition in the wireless business.

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