U.S. Markets closed

FCC Chief Reaffirms Support for T-Mobile Deal and Sets Up Vote

Todd Shields and Susan Decker

(Bloomberg) -- Federal Communications Commission Chairman Ajit Pai said he’d move soon to push T-Mobile US Inc.’s proposed purchase of Sprint Corp. through the agency, the final regulatory step for the $26.5 billion deal.

Pai, in a statement issued as the Justice Department cleared the deal, applauded the gains in fast 5G communications from the merger. He didn’t say when the vote would be held, but three Republicans who comprise a majority at the FCC, including Pai, earlier expressed support for the deal, and their votes will be enough.

“The commitments made to the FCC by T-Mobile and Sprint to deploy a 5G network that would cover 99% of the American people, along with the measures outlined in the Department’s consent decree, will advance U.S. leadership in 5G and protect competition,” Pai said in the statement.

The deal has the “potential to help close the digital divide in rural America and maintain our nation’s leadership in 5G,” he said.

The merger faces a lawsuit from states that contend the combination will reduce competition and raise prices for consumers, with a trial scheduled for October.

New York’s Letter

New York sent a letter to the judge on Thursday saying T-Mobile has refused to turn over needed documents “that go to the heart of this merger challenge,” including certain internal discussions regarding talks with the Justice Department and the FCC. Five other states, including Kansas and Nebraska, signed on to the Justice Department’s approval.

The transaction proposed in 2018 would combine the third- and fourth-largest nationwide mobile providers into a single competitor to the established leaders, AT&T Inc. and Verizon Communications Inc.

Supporters say the new company could quickly build an advanced 5G network, a priority of the Trump administration. Critics say it will reduce competition by eliminating Sprint as a separate force, and ultimately raise prices for consumers.

Pai on Friday said he would offer the merger and accompanying economic analysis to fellow commissioners for them to consider, and to vote upon when ready. FCC rules allow three weeks or more for the process to play out behind closed doors.

‘Behind Closed Doors’

Democratic Commissioner Jessica Rosenworcel has expressed concern that agency Republicans voiced support without awaiting the agency’s own analysis, and she cited the merger’s possible effects.

“I remain skeptical that this combination is good for consumers, good for competition, or good for the economy,” Rosenworcel said in a statement on Friday. “Before the FCC votes on this new deal, the public should have the opportunity to weigh in and comment. Too much here has been done behind closed doors.”

Republican Commissioner Brendan Carr said in an interview in Bloomberg’s Washington office that he will vote in favor because the merger would give rural areas access to high-speed broadband for services like telemedicine that promise to be more effective with 5G networks. Developers of applications, devices and other products reliant on the faster networks would more likely be American companies if the U.S. has a bigger and more developed network than China, he said.

Pai first announced his support for the merger on May 20, and FCC’s other Republicans followed. Since then the deal has changed, with the companies agreeing with the Justice Department to set up a new, nationwide wireless provider to restore a fourth competitor to the market.

The role of the new competitor is to be filled by Dish Network Corp. The company, known for its satellite TV service, has agreed to pay $5 billion for wireless assets and use airwaves from T-Mobile and the Boost brand to set up the service. Separately, Dish already has amassed a $21 billion trove of airwaves that could be used for broadband, and is under pressure to offer service using the frequencies or have the FCC seize them.

Boost and Virgin

In addition to spectrum Dish is buying Sprint’s prepaid businesses, Boost and Virgin. T-Mobile also is required to provide Dish with access to its mobile network for seven years while Dish builds out its own 5G network, according to a statement from the Justice Department.

Dish could face penalties of up as much as $2.2 billion and potential forfeiture of licenses if it doesn’t meet its commitments, according to a Dish filing with the agency.

Carr said there were “concrete requirements” on Sprint and T-Mobile to build the networks and “robust obligations” on Dish with potentially billions of dollars in penalties for all the companies if they fail to follow through on their pledges, he said.

Consumer groups weren’t convinced, with Washington-based Public Citizen calling it “a monopolistic disaster.”

Skeptical of Dish

“Dish is never going to build out a wireless network,” Alex Harman, competition policy advocate for Public Citizen’s Congress Watch Division, said in a statement. “It has been promising the Federal Communications Commission and the Congress for nearly a decade that it would enter the wireless market but has never done so. But the company’s spectrum assets have only grown more valuable as it has sat on them without taking action to build any network infrastructure. Why should we believe Dish now?”

In the July 25 letter, New York Assistant Attorney General Jeremy Kasha expressed skepticism about the agreement, saying internal documents “may reveal that certain operational terms of their agreements with Dish are designed to hobble Dish as a meaningful competitor.”

The FCC won’t reject a deal blessed by the Justice Department, said Gigi Sohn, a former FCC Democratic aide who opposes the merger.

“That’s not going to happen,” Sohn said in an interview before the Justice Department acted.

T-Mobile’s acquisition of Sprint should receive a final nod from the FCC no later than early September, Bloomberg Intelligence analyst Matthew Schettenhelm said in a note today. Pai’s announcement that he’d circulate a decision “soon,” and the fact that Dish divestitures can be addressed later, should ensure a decision by then, Schettenhelm said.

(Updates with comments from FCC commissioner in 12th paragraph.)

--With assistance from Olga Kharif.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net;Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Steve Geimann

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.