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After T-Mobile/Sprint deal commitments, FCC chairman recommends merger approval

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After T-Mobile/Sprint deal commitments, FCC chairman recommends merger approval

After receiving a series of additional commitments from T-Mobile US Inc. and Sprint Corp., a top U.S. regulator said he is ready to recommend the pending merger between the two wireless operators for approval.

U.S. Federal Communications Commission Chairman Ajit Pai, a Republican, said in a May 20 news release that he now believes the transaction "is in the public interest," and he intends to present his colleagues with a draft order that would approve the deal and "resolve this matter" in the coming weeks. At least one other Republican commissioner has already added his voice in support of the deal, while Commissioner Jessica Rosenworcel, a Democrat, said in a May 20 tweet that she continues to have "serious doubts" about the combination.

The commissioners' comments come on the same day that T-Mobile said in a filing that it submitted a set of commitments to the FCC in connection with the pending deal. The commitments included timelines around the deployment of next-generation 5G service as well as a pledge to divest Sprint's Boost Mobile prepaid brand.

SNL Image
Sprint Executive Chairman Marcelo Claure and T-Mobile US CEO John Legere
Source: T-Mobile US

In terms of 5G, T-Mobile said that within three years of closing its deal with Sprint, the combined entity will deploy a 5G network that covers 97% of the U.S. population. Within six years of the deal's close, the 5G network would cover 99% of the population. This coverage will include a focus on rural areas, with 85% of rural Americans receiving coverage from a 5G network within three years, and 90% receiving coverage within six years.

When fully implemented, 5G is set to offer download speeds many times faster than the current 4G LTE networks, as well as greater opportunities for connectivity, enabling the new era of the internet of things where billions of devices in homes and factories will be connected at all times.

As for Boost Mobile, the company said it will divest the prepaid business through a market-based process. The combined T-Mobile/Sprint will offer the Boost buyer terms for a six-year wholesale mobile virtual network operator agreement that will include wholesale rates that "meaningfully improve upon the commercial terms reflected in the most favorable of T-Mobile's and Sprint's three largest MVNO agreements."

T-Mobile said it will identify the buyer of Boost and submit the negotiated MVNO agreement to the FCC within 120 days of closing the Sprint transaction.

The FCC will not require any spectrum divestitures as a condition for approval, a senior agency official told reporters during a call on May 20.

Related to MVNO agreements, T-Mobile pledged to maintain Sprint's existing MVNO agreement with the cable operator Altice USA Inc. Moreover, the combined entity will engage in "good faith negotiations" to expand the existing agreement between Sprint and Altice to the new T-Mobile 5G network.

Among other commitments, T-Mobile also reiterated its pledge to roll out an in-home broadband product. Specifically, T-Mobile said that within three years of buying Sprint, the combined entity will market an in-home broadband service to at least 9.6 million eligible households, of which at least 2.6 million will be rural. Within six years of the deal's close, the new T-Mobile will market its in-home broadband service to at least 28 million eligible households, of which 5.6 million will be rural.

"I believe we will nail all of these goals — nationwide 5G, rural 5G and in-home broadband!" T-Mobile CEO John Legere wrote in a May 20 blog post. He added that if the company fails to live up to its commitment, "We'll pay until we do."

According to T-Mobile's filing, the company has agreed to "substantial voluntary contributions" for missed deadlines, with those voluntary contributions set to continue until unmet obligations are fulfilled.

If the commitments are not upheld, the parties will have to pay the U.S. Treasury Department up to $2.4 billion a year, a senior FCC official said on the call.

Following Pai's news release, Republican FCC Commissioner Brendan Carr said he too supported the combination of T-Mobile and Sprint because "Americans across the country will see more competition and an accelerated build-out of fast, 5G services."

However, Rosenworcel said in her tweet that similar levels of consolidation in other industries have hurt more than helped consumers. Additionally, a senior FCC official said on May 20 that the commitments do not explicitly address concerns about job losses raised by the Communications Workers of America, the largest communications and media labor union in the U.S. The official acknowledged, though, that the 5G build-out appears to involve numerous construction and power jobs.

T-Mobile and Sprint announced their proposed merger more than a year ago. In order for the deal to close, it must be approved by both the FCC and the U.S. Department of Justice at the federal level, as well as by a number of states.