T-Mobile’s $26.5 billion takeover of Sprint cleared a major hurdle Tuesday when a federal judge rejected claims by more than a dozen states and consumer advocates that the deal will create a corporate behemoth that will raise prices and destroy competition.
The Justice Department previously signed off on the merger, and another federal judge still and a California utility board need to approve it before the expected April 1 closing date. The merger will decrease the number of major wireless companies from four to three and give Verizon and AT&T a much heftier competitor.
Here are five things to know:
1. T-Mobile and Sprint customers’ bills could increase — or they might not.
T-Mobile has promised it won’t raise prices for three years. But after that, there are no promises.
U.S. District Judge Victor Marrero said in his ruling Tuesday that competing arguments by T-Mobile and Sprint that the deal will cut prices and by the states that it will increase prices “essentially cancel each other out.”
Consumer Reports senior policy counsel George Slover says the merger “should never have made it out of the boardroom” and that the states suing to stop it raised valid antitrust concerns.
“Going from four established nationwide wireless networks to only three — with the possibility that we might someday, eventually, get some version of a fourth network added back into the mix — will be extremely damaging to competition,” Slover said in a statement. “It will degrade the choices available to consumers, the options for network access, and the incentives to create better and more innovative service.”
2. T-Mobile is no longer regarded as a bit player.
The company has been around since 1994 — the first iteration was VoiceStream Wireless PCS, a subsidiary of Western Wireless Corp. Deutsche Telekom AG bought the company in 2001 for $35 billion and later renamed it T-Mobile USA.
By the time John Legere came on as chief executive in 2012, T-Mobile was shedding customers and AT&T was about to swallow it up in a $39 billion merger. A federal judge ultimately blocked the merger, and Legere pulled off a series of smart business moves that made T-Mobile competitive again — including making a deal with Apple to sell its popular iPhone, improving its network to address customer complaints and taking the company public in 2013. Deutsche Telekom remains the majority owner.
3. The Justice Department has rejected similar mergers in the past, but DISH makes the difference.
Nine years ago, the Justice Department under President Barack Obama opposed AT&T’s request to merge with T-Mobile, at the time the nation’s largest and fourth-largest wireless phone carriers.
The DOJ raised many of the same arguments as the states in the current merger — that consumers would pay higher bills and the lack of competition could result in fewer innovative products — but also that jobs could be cut to eliminate redundancies.
Legere saw an opening with President Donald Trump’s election in 2016 and his appointment of regulators more friendly to mergers. He launched his bid for Sprint in 2018.
The Justice Department gave the T-Mobile and Sprint merger the green light because it includes a side deal to make satellite TV company DISH a nationwide mobile carrier to replace Sprint with a next-generation, 5G cellular network.
Consumer Reports’ Slover doubts that DISH, which has no mobile phone network and no experience providing wireless phone service, can fill the gap created by Sprint’s exit.
“Sprint is an established carrier, with a track record of determination and success in spurring competition that benefits consumers,” he said in the statement about the merger. “After this merger, even under the best of very uncertain circumstances, DISH won’t fill the gap left by Sprint’s exit for years, if ever.”
4. AT&T and Verizon may have to up their game.
At the helm of T-Mobile, Legere pushed more-established wireless carriers to be more responsive to consumers’ wants and needs. For example, most eschewed contracts and offered unlimited data plans to compete with T-Mobile, whose discounts to customers includes such things as free or discounted Netflix subscriptions and free international data.
“Look out Dumb and Dumber and Big Cable – we are coming for you … and you haven’t seen anything yet!” Legere said in a statement Tuesday.
He will step down when the merger becomes effective, and T-Mobile Chief Operating Officer and President Mike Sievert will take over.
5. Can the merger be stopped?
New York Attorney General Letitia James, who was one of the leading attorneys general opposing the mergers, said Tuesday her office may appeal the judge’s ruling.