T-Mobile and Sprint have made enough concessions that the nation’s top telecom regulator is prepared to approve the telecom companies’ $26 billion merger.
The combined company will sell Sprint’s Boost Mobile prepaid cellphone brand and commit to deploying a super-fast, next-generation 5G network covering 97% of the U.S., Federal Communications Commission chairman Ajit Pai said in a statement Monday.
“The companies have also taken steps to respond to concerns that have been raised about this transaction,” Pai said. “Most importantly, in addition to their prior commitment not to raise prices for three years, T-Mobile and Sprint have decided to divest Boost Mobile. This sale is designed to address potential competitive issues that have been identified in the prepaid wireless segment.”
Pai said he will recommend the FCC approve the deal, which also requires Justice Department approval.
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Shares of Sprint (S) rose 25% to $7.75 in early market trading; and T-Mobile (TMUS) rose 6% to $79.80.
Critics opposing the deal, announced in April 2018, have argued the elimination of one of the four largest wireless providers – Sprint is the No. 4, behind Verizon, AT&T and T-Mobile – will lead to higher prices for cell phone service.
But T-Mobile and Sprint have posed the deal as a way to make the companies more competitive and pressure AT&T and Verizon and allow them to deploy 5G service, which promises speeds up to 100 times faster than on current networks.
In a recent FCC filing, Sprint said it badly needed the merger to remain competitive. “Simply put, Sprint is not on a sustainable competitive path.”
T-Mobile CEO John Legere said in an online post Monday, “The New T-Mobile will be a disruptive rival with the resources to go toe-to-toe with established behemoths to drive competition and innovation that benefits everyone, everywhere.”
The combined company will invest nearly $40 billion within three years of the deal’s closing “to deliver a more robust nationwide 5G network and next-generation services than either company can achieve on its own,” the companies said in an FCC filing submitted Monday.
T-Mobile and Sprint’s concessions directly address Pai’s concerns at the FCC. “Two of the FCC’s top priorities are closing the digital divide in rural America and advancing United States leadership in 5G, the next generation of wireless connectivity,” he said. “The commitments made today by T-Mobile and Sprint would substantially advance each of these critical objectives.”
The company pledged to have a 5G network covering 97% of the US population “within three years of the closing of the merger and 99% of Americans within six years,” Pai said. “The construction of this network and the delivery of such high-speed wireless services to the vast majority of Americans would substantially benefit consumers and our country as a whole.”
This 5G network would also reach deep into rural areas, Pai said, with 85% of rural Americans covered within three years and 90% covered within six years. Additionally, T-Mobile and Sprint have guaranteed that 90% of Americans would have access to mobile broadband service at speeds of at least 100 Mbps and 99% would have access to speeds of at least 50 Mbps.
T-Mobile and Sprint also pledged to rollout 5G service using midband spectrum, which could bring broadband home connectivity to rural parts of the U.S. where internet speeds still are often far below urban locations. “Demonstrating that 5G will indeed benefit rural Americans, T-Mobile and Sprint have promised that their network would cover at least two-thirds of our nation’s rural population with high-speed, mid-band 5G, which could improve the economy and quality of life in many small towns across the country,” Pai said.
The companies’ willingness to sell Boost Mobile would “address potential competitive issues that have been identified in the prepaid wireless segment,” Pai said.
Failure of the companies to meet these commitments could result in fines totaling in the billions, said Pai, who will recommend the FCC approve the merger. “This is a unique opportunity to speed up the deployment of 5G throughout the United States and bring much faster mobile broadband to rural Americans,” he said. “We should seize this opportunity.”
Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.