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Sprint, T-Mobile mega-merger gets nod from key US official

Douglas Gillison
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The companies have agreed not to raise prices for three years

The companies have agreed not to raise prices for three years (AFP Photo/JUSTIN SULLIVAN, SAUL LOEB)

Washington (AFP) - The top official at the US communications regulator on Monday announced his support for the proposed $26 billion merger between telecoms firms Sprint and T-Mobile.

The decision raises the chances the merger will win final approval from federal authorities. But the companies still face an anti-trust review by the US Department of Justice, which media reports say fears declining market competition if the deal goes through.

Ajit Pai, chairman of the Federal Communications Commission, said both companies had promised his agency they would offer a next-generation 5G network to 99 percent of Americans within six years of completing the deal while also expanding access to mobile broadband.

The companies have agreed not to raise rates for three years and will divest from the Sprint subsidiary Boost Mobile.

"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," Pai said in a statement.

Failure to make good on their pledges could result in "serious consequences," including billions of dollars in penalties, creating an incentive for the companies to meet their obligations on time, according to Pai.

The commission is due to consider the merger proposal next month.

- A rival to US giants -

Pai said the deal was intended to allay anti-trust concerns.

"This sale is designed to address potential competitive issues that have been identified in the prepaid wireless segment," he said in the statement.

Nevertheless, trading in shares of Sprint was briefly halted in the afternoon after tumbling on a Bloomberg report that Justice Department officials did not favor permitting the merger to go forward.

The Justice Department in 2011 blocked an attempt by AT&T to acquire T-Mobile, saying the market was already too concentrated to allow it.

On Wall Street, Sprint closed up 12.5 percent while T-Mobile added 3.9 percent.

After the merger, the combined company's size would help it rival US giants AT&T and Verizon Communications, which dominate the US market.

T-Mobile and Sprint are respectively the third- and fourth-largest wireless carriers in the United States with a combined 131 million subscribers that would virtually match second-ranked AT&T.

Sprint, majority owned by Japan's SoftBank, and T-Mobile, a unit of Germany's Deutsche Telekom, had in the past tried and failed to agree on merger terms.

5G, or fifth-generation wireless communications networks would enable services such as remote surgery or driverless cars and allow customers to experience video and virtual reality with greater ease.

Global competition to develop the technology has heated up but in a move widely seen as aimed squarely at Chinese rival Huawei, Washington has barred US companies from engaging in telecommunications trade with foreign companies deemed as threatening American national security.

T-Mobile chief John Legere told lawmakers in February his company did not and would not use Huawei equipment in its networks.

SoftBank plans to cease using Huawei equipment, according to media reports late last year. Sprint did not respond to an AFP request for comment on Monday.

In December, the proposed merger won approval from regulators who vet acquisitions for national security risks.

The Communications Workers of America union says the planned merger could cost 30,000 jobs but Sprint's CEO Michael Coombs instead warned last month of layoffs if the deal is blocked.