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Sprint, T-Mobile Deal to Stay As Is Despite Pushback, DOJ Says

Nov. 7, 2019, 5:45 PM

No modifications are needed to the government’s sign off on T-Mobile U.S. Inc.'s $26 billion deal with Sprint Corp., despite criticism that the merger reduces competition and is too complicated to be properly enforced, the Justice Department said.

In a Nov. 6 filing in the U.S. District Court for the District of Columbia, the DOJ defended its settlement of the telecom merger. Comments submitted to the court from the deal’s opponents are misplaced since the merger will deliver “immediate” benefits to consumers, the petition said.

“After careful consideration of these comments, the United States has determined that nothing in them casts doubt on its conclusion that the public interest is well-served by the proposed remedy,” the DOJ said.

Separately, a handful of state attorneys general have sued to block the deal in a New York federal court on grounds that the merger will lessen competition and drive up prices for consumers. In response, T-Mobile announced Nov. 7 that it will offer a new $15 monthly data plan, but only if the deal with Sprint closes. Additionally, T-Mobile said it’s in “friendly talks” to renew the terms of the deal, including the merger’s price.

The government’s Nov. 6 filing was in response to 32 comments submitted in the D.C. District Court, which is currently assessing the DOJ’s July approval of the merger. Government merger settlements are routinely reviewed by federal courts under the Tunney Act to ensure they’re in the public interest.

A majority of the comments were in favor of the deal, but almost all of those that opposed it “ignore the benefits to the public from this merger,” the DOJ said.

Sprint and T-Mobile won DOJ antitrust approval after the companies agreed to sell spectrum assets to Dish Network Corp. in order to establish a new wireless carrier. Sprint will also offload its prepaid wireless carrier plan to Dish, as apart of the DOJ’s settlement.

Several commentators, including a group of antitrust economists and the labor union Communications Workers of America, argued that Dish isn’t likely to succeed as a wireless carrier since the company has been acquiring spectrum for years but hasn’t yet deployed a network on its own.

The government rebuffed those claims saying that Dish is best positioned to be a new carrier since it has “far more spectrum at its disposal than any other company aside from the existing nationwide wireless carriers.”

Dish’s more than $20 billion in spectrum licenses along with the assets it will receive as part of the Sprint-T-Mobile deal provides it with the ability “to compete more quickly and more effectively than another entrant could,” the DOJ added.

Too Complex

Critics, including CWA, also said that the DOJ’s settlement is “too complicated” to be enforced since it contains behavioral provisions such as supply requirements that require T-Mobile to let Dish to use its wireless network for seven years as Dish builds out its own 5G network.

Makan Delrahim, the chief of the DOJ’s antitrust division, has said in policy speeches prior to the Sprint T-Mobile deal that he prefers structural remedies, such as divestitures, over behavioral conditions since they prevent the government from having to continually oversee a merger.

The DOJ also said the settlement with Sprint and T-Mobile is “profoundly structural” and that while the antitrust division “has expressed a preference for structural remedies, it has not taken the position that behavior conditions are never appropriate.”

Next Steps

The DOJ’s response to comments in the Tunney Act typically marks the final step before a federal judge signs off on the merger settlement.

However, more than a dozen state attorneys general have asked Judge Timothy Kelly to hold off until the separate multi-state litigation in New York is completed. Kelly has not yet weighed in on the request, which was filed Oct. 9.

New York Attorney General Letitia James and California Attorney General Xavier Becerra are spearheading the suit in the U.S. District Court for the Southern District of New York. Oral arguments are set to begin in December.

In prior filings and in the DOJ’s latest Nov. 6 comments, the government opposes any delay to the Tunney Act process and says the effort by states could be unconstitutional.

The case is United States v. Deutsche Telekom AG, D.D.C., No. 1:19-cv-02232, Response to public comments 11/6/19

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com