US DOJ Has Serious Concerns About T-Mobile's Merger With Sprint
Last spring, Sprint and T-Mobile announced that they would merge together to provide the best 5G network possible. Sprint CEO Marcelo Claure noted, “Going from 4G to 5G is like going from black and white to color TV...It’s a seismic shift-- one that only the combined company can unlock nationwide to fuel the next wave of mobile innovation.” The companies also believe that the merger will give them an edge over their competitors AT&T and Verizon Wireless. The deal was initially supposed to be completed by the first half of 2019.
However, the Sprint and T-Mobile union has been met with some resistance. The merger requires approval from both federal and state governments. At least a dozen states, including California and New York, have expressed concerns about the merger. They believe that the union could lead to less competition and higher prices. New York state attorneys also accused the two telecommunications companies of secretly filming some aspects of the deal and keeping certain parts away from the public. The New York Public Service Commission eventually approved the Sprint and T-Mobile merger this past February despite the controversy.
The merger has also faced serious criticism from Congress. Eight Senators argued that the merger could raise monthly bills by up to 10%. The companies negotiated with members of Congress to earn their support. T-Mobile has promised to not increase prices for at least three years, while Sprint has insisted that they will not use any equipment from Chinese companies Huawei and ZTE. Congress has recently pushed to eliminate the use of Chinese technologies in the federal government due to fears over spying
The merger is now facing opposition from the Justice Department. The merger is currently being reviewed by the Federal Communications Commission (FCC). Like the state governments, the Justice Department reportedly fears that the merger would decrease competition and ultimately harm consumers. The United States boasts a number of antitrust laws that restrict mergers, acquisitions, and other monopolistic practices. It remains to be seen whether the FCC will consider this merger to be a violation of the antitrust laws.
Both T-Mobile CEO John Legere and Sprint CEO Marcelo Claure have insisted that the rumors of the failed merger are false. Legere declared that the rumors are “simply untrue”, while Claure maintained that negotiations are “ongoing”. Regardless of the veracity of the rumors, Sprint shares fell by 9% and T-Mobile shares fell by 4%. A final decision is expected from the FCC by the beginning of June.