The Department of Justice Antitrust Division has delayed, at least one more day, its long-awaited announcement on T-Mobile US Inc.’s proposed $26 billion purchase of Sprint Corp. as it attempts to convince a coalition of state attorneys general to drop their opposition to the controversial telecom deal, the Fox Business Network has learned.
People with direct knowledge of the thinking of Justice Department antitrust chief Makan Delrahim said he delayed the issuance of a so-called consent decree on the merger — effectively giving the agency’s green light on the deal as long as certain conditions are met — as he and his staff try to convince at least some of the 17 state AGs suing to block the deal to drop their opposition.
The DOJ is currently meeting with the AGs, led by New York’s Letitia James, and explaining how the consent decree’s various conditions, which will include the creation of another wireless carrier, should address their concerns that the merger will lead to higher wireless prices for consumers because it would reduce competition, these people add.
The DOJ was expected by company officials to approve the deal Thursday, people close to the transaction tell Fox Business. These same people say they continue to expect that the DOJ will make its announcement Friday, but prolonged negotiations with the AGs could delay the consent decree’s announcement into next week.
A DOJ antitrust spokesman had no immediate comment.
The move by the DOJ to delay its announcement has unsettled investors and industry executives given the lengthy and complicated process that has led the antitrust division to be on the verge of approving the controversial merger. Shares of Sprint, the acquired company, fell nearly 3 percent on Thursday.
The consent decree is expected to anoint Dish Network chief Charlie Ergen as the fourth major wireless carrier to compete with AT&T, Verizon and the combined T-Mobile Sprint, and according to the DOJ eliminate those antitrust concerns over a lack of wireless competition by some the DOJ’s own staffers as well as the AGs who joined the litigation.
In the complicated negotiations, Dish agreed to buy both assets and spectrum from the T-Mobile and Sprint to create the network in a way that had seemed to appease the antitrust staff in the DOJ, who initially opposed the merger, and both companies, which didn’t want to give up so much spectrum that they would be at a competitive disadvantage.
But a major existential threat to the merger was the state AGs lawsuit, which could bog down both companies in federal court for years. The theory driving the DOJ’s delay is that by negotiating with the states, even picking off one AG would weaken the rest of the opposition in the courts.
Officials from T-Mobile, Sprint and Dish didn’t return calls for comment.
If the deal is announced tomorrow, it will be a long time coming. The possible DOJ nod follows a months-long regulatory review that has been described as the "War and Peace" of antitrust evaluations to ensure the creation of a combined T-Mobile and Sprint wouldn’t lead to higher wireless prices because it effectively eliminates a major carrier.
Expect Delrahim to take a significant victory lap in announcing the final terms since the merger has faced significant opposition from consumer groups. At Delrahim's direction, the DOJ is expected to make a splashy announcement on how the final deal will benefit consumers and have significant economic benefits for the nation, according to people working with the companies.
Announced in April 2018, the merger between T-Mobile, the nation’s third-largest wireless operator, and Sprint, the fourth-largest operator, was contentious from the onset because it would have reduced the number of major wireless carriers to three from four, automatically sparking an antitrust review by government agencies.
In May, lawyers for T-Mobile and Sprint convinced the GOP-controlled Federal Communications Commission that such a move wouldn't lead to higher wireless prices for consumers because Sprint was such a weak competitor compared to players like AT&T, Verizon and T-Mobile. By teaming up with T-Mobile, Sprint might be able to survive financially, allowing the combined company to compete on price with the others, the companies argued.
Officials in the Trump White House and the president himself were on board for another reason: The new company would emerge as a major player in the development of a superfast 5G wireless network, allowing the U.S. to compete against countries like China. The Trump administration believes U.S. competitiveness in 5G is both an economic and national security priority since the technology is expected to create millions of jobs and can be used for espionage purposes.
But the final word on any merger always comes from the DOJ's antitrust division, which could sue to block it. Delrahim is a Trump appointee, but the agency’s staff does not align itself with the free-market thinkers in the White House led by economic advisers Larry Kudlow and Treasury Secretary Steven Mnuchin.
Rather, it is largely comprised of career lawyers with a consumerist viewpoint. They blocked similar deals such as AT&T’s proposed merger with T-Mobile in 2011. Legere, in 2014, was back with another deal, this time to combine with Sprint. But that effort fizzled out before it could even be reviewed by the DOJ when the Obama FCC voted no on the combo.