This week could be a very important one for the $26.5 billion for the merge of T-Mobile and Sprint. With the approval of FCC under the hood, the Department of Justice will sign off on the transaction later this week. The DOJ has been against the deal from the beginning, fearing that by reducing the number of major carriers to three from four, prices will end up a negative impact on consumers. We’ve often disagreed with the reasoning that points out a combined T-Mobile-Sprint could apply more competitive pressure to AT&T and Verizon than the pair is currently facing. But leaving the main talk temporarily.
So, what are the factors that made the Justice Department change its mind? Well, it seems that T-Mobile and Sprint both agreed to help create a new competitor in the wireless industry. To pacify the FCC, T-Mobile and Sprint agreed to sell off the Boost Mobile pre-paid unit of Sprint, and this also appears to be lag behind the 180-degree reversal at the Department of Justice.
These two major carriers will also divest some of their spectrum as part of their deal with the DOJ. At the start, there was talk that Amazon is showing interest in Boost, and the thought of such a financially strong firm owning a wireless carrier probably made the government regulatory agency quite happy. However, today’s report by Bloomberg states that one of the other front-runners shows interest in Boost, Dish Network, is quite close to purchasing Boost for a worth believed to be at least $6 billion.
T-Mobile And Sprint Could Close Their Merger
Dish Chairman Charles Ergen has long played an important role to enter the industry, and in 2013, the company was involved in an epic two-way battle. SoftBank of Japan won that battle and now owns 80% of the nation’s fourth-largest carrier.
The report by Bloomberg also cites multiple sources said to be familiar with the talks. The mentioned sources are pointing out that nothing has been finalized and there is a chance that Dish could still pull out of the negotiations.
Boost has around 9 million subscribers and the transaction with Dish is expected to include part of the T-Mobile and Sprint wireless spectrum. Sprint has a large amount of mid-band 2.5 GHz airwaves which it plans to use in combination with the low-frequency 600MHz T-Mobile spectrum to build a national sub-6GHz 5G network. It is unclear how much of this spectrum would receive any buyer Boost, and most likely it will not be enough to allow Boost to leave its MVNO status. A virtual mobile network operator (MVNO), sells a wireless service but does not own any of the networks used by customers. Boost, for example, currently uses Sprint’s 4G LTE network. Even after getting rid of the Boost, the combination of T-Mobile-Sprint would still own prepaid MetroPCS operators and Virgin Mobile.
T-Mobile and Sprint have been watching for a long time. In 2014, both carriers raised the idea of a merger in talks with the FCC and the Justice Department. But both agencies told the operators that they would not approve any agreement. So, before a merger was announced, T-Mobile and Sprint decided to remain independent. And both companies have started to take different paths. T-Mobile, under the leadership of CEO John Legere, has become the fastest growing and innovative wireless operator. Legere has transformed T-Mobile into an Un-carrier, solving the critical points for consumers; In August 2015, T-Mobile finally passed Sprint to become the third largest US carrier. Meanwhile, Sprint has tried several promotions in an attempt to win over some consumers. Earlier this year, the company began offering its new customers a 30-day money-back guarantee and differs from its competitors by offering lease offers on new phones.
T-Mobile and Sprint announced the merger of $26.5 billion on April 29 last year. Both companies agreed on a deadline of April 28th of this year to close the deal, but then extended the deadline until July 29th.
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