T-Mobile and Sprint attained a major milestone in their quest for regulatory approval of their merger plans with the news today that the Department of Justice and the attorneys general of five states have approved the merger on the condition that Sprint sells its prepaid wireless businesses and its spectrum holdings in the 800 MHz band to DISH Network. In connection with the deal, DISH has committed to deploying a 5G network covering 70% of the U.S. population by 2023. T-Mobile CEO John Legere told investors on the company’s earnings call today that he expects the merger to close in the second half of 2019.
Legere said the merged Sprint T-Mobile would be a “supercharged Un-carrier,” commenting that “we are going to create a bigger and bolder competitor with a transformative 5G network,“ said Legere.
Assistant Attorney General Makan Delrahim of the DOJ’s antitrust division weighed in on the merger conditions agreement in today’s DOJ announcement about the merger approval. “With this merger and accompanying divestiture, we are expanding output significantly by ensuring that large amounts of currently unused or underused spectrum are made available to American consumers in the form of high-quality 5G networks,” he said.
FCC Chairman Ajit Pai previously voiced support for the merger, subject to certain additional conditions, and said today that he would circulate a draft order to the other commissioners soon to formalize that approval. Legere said he expects to have all federal regulatory approvals by the third quarter.
The merger has received approval from 18 of the 19 state public utility commissions that must approve it, with only California’s approval still required, according to Legere.
One other hurdle is the resolution of a lawsuit filed by several states seeking to block the merger. That suit was filed before plans for the divestitures to DISH were revealed and according to Legere the agreement reached with the DOJ “will solve many, if not all, of [the states’] concerns.” In many cases, those concerns relate to 5G buildout commitments, he said.
Asset Sale to DISH
The deal with DISH Network, valued at approximately $5 billion, is contingent on the Sprint T-Mobile merger being closed and is expected to be completed within three months of that closing. As expected, the deal calls for DISH to obtain all of Sprint’s prepaid businesses, including Boost Mobile, Virgin Mobile and Sprint-branded prepaid service. While DISH builds out its own 5G network, existing Sprint prepaid customers will be supported on Sprint’s network and will transition to the merged company’s network.
Through a seven-year agreement, DISH also will be able to “seamlessly access” the merged Sprint T-Mobile network in areas where DISH has not yet built its own network facilities.
The spectrum that DISH Network is purchasing will augment the satellite provider’s existing spectrum holdings in the 600 MHz, 700 MHz, AWS-4 and AWS H bands. As part of the agreement, DISH also gains new buildout schedules.
The company did not say what impact its new 5G buildout plans will have on previously announced plans to build an internet of things (IoT) network. Plans for the IoT network were put in place last year, in large part, to meet initial — and presumably more aggressive — buildout deadlines.
Although some industry observers have questioned DISH’s prospects in a highly competitive wireless market, DISH CEO Charlie Ergen attempted to address those concerns in comments included in DISH’s announcement today about the deal by outlining the company’s previous success in breaking into the satellite broadcast market.
“We’ve been here before,” Ergen said. “When we entered pay-TV with the launch of our first satellite in 1995, we faced entrenched cable monopolies, and our direct competitor was owned by one of the largest industrial corporations in the world. As a new entrant, DISH encountered many skeptics who questioned our ability to succeed. But customers loved the disruption we brought to the marketplace.”
He pointed to the 100% digital experience, local-into-local broadcast, the DVR and ad-skipping as key disruptions, noting that “our substantial investments, constant innovation, aggressive pricing and commitment to the customer led us to become the third-largest pay-TV provider.”
In entering the wireless business, he pledged to “again serve customers by disrupting incumbents and their legacy networks.”