T-Mobile, Sprint merger sets stage for shift in wireless industry

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With the approval of the $26bn merger between T-Mobile and Sprint on Friday, the stage is set for a shift in the U.S. wireless industry at a moment when carriers are racing to deploy the next generation of ultrafast mobile service.

In recent months, the merger attracted heightened attention from several presidential candidates, with Sens. Cory Booker (D-N.J.), Kirsten Gillibrand (D-N.Y.), Amy Klobuchar (D-Minn.), Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) signing onto a letter that said it would result in “unacceptably high levels of concentration in an already consolidated wireless industry.”

Consumer groups such as Public Knowledge echoed those concerns, arguing a combined T-Mobile and Sprint would result in higher prices and fewer options for consumers. Many critics pointed to the fact that T-Mobile had already become a fierce competitor — offering more customer-friendly contracts, for example — precisely because the government had warded off an attempted merger by the two companies in the past.

But T-Mobile and Sprint offered concessions to reshape their merger in recent months in a bid to win over federal regulators. In May, the companies pledged to build out 5G wireless to most of the country, including much of rural America, while offering “same or better rate plans at the same or better prices” for the next three years. The announcement satisfied FCC Chairman Ajit Pai, who warned the companies would “suffer serious consequences” if they break their promises.

The deal, which is valued at more than $5 billion, will allow Dish to offer service over T-Mobile’s network until it’s able to operate its own, Delrahim said. Existing spectrum holdings at Dish helped the companies sell their plan to the Justice Department, officials said Friday, and Dish must meet its build-out targets or face billions of dollars in federal penalties.

Some of the deal’s skeptics, however, said the companies’ concessions are unlikely to address their concerns: It could take too long for the sale of spectrum and other assets to Dish to result in a carrier able to compete with AT&T, Verizon and a merged T-Mobile and Sprint.

The deal replaces a weak competitor in Sprint with a potentially weaker one in Dish, said Roger Entner, a wireless industry analyst and founder of Recon Analytics. The constraints on Dish’s business would prevent it from being able to price its services competitively, he said. Adding to Dish’s challenges, he said, consumers seem to care more about reputation than price in choosing a carrier.

T-Mobile, which is operated by Germany’s Deutsche Telekom, and Sprint, which is owned by the Japanese conglomerate SoftBank, announced their merger last April. Without such a combination, T-Mobile and Sprint said they could not muster the necessary investments individually to develop and deploy 5G services, putting them at a major disadvantage against AT&T and Verizon.