Bloomberg reported that officials at the U.S. Department of Justice want T-Mobile and Sprint to spin out a fourth wireless carrier as a condition for approving the proposed merger between the two.
Citing unnamed officials within the DOJ, Bloomberg reported the DOJ is concerned about the competitive effects the merger will have on the wireless market in the U.S. If approved, the merger would reduce the number of nationwide wireless carriers from four to three: (new) T-Mobile, Verizon and AT&T.
Executives at T-Mobile and Sprint, which represent the two smallest nationwide carriers in the U.S., have argued that the combined company would pose a more substantial competitive threat to market leaders AT&T and Verizon.
The two companies have also made a series of promises about pricing and network coverage if the deal were approved, in hopes of proving to regulators that the merger would not harm consumers in the long run. The two companies have also pledged to spin off Sprint’s Boost Mobile prepaid brand if the merger is approved.
T-Mobile also has said it would enter the home broadband market with a 5G fixed wireless offering if allowed to merge with Sprint. T-Mobile has said its planned home broadband service would present a new competitive challenge to telecom companies providing wireline broadband and pay TV services—including Verizon and AT&T.
Setting up a fourth competitor in the wireless market through a spin-out would be a tall challenge for Sprint and T-Mobile, though a New Street Research analyst told Bloomberg it was possible.
The Justice Department has not been particularly supportive of past attempts at mergers within the wireless market. It opposed a 2014 attempt by Sprint and T-Mobile to merge, and it also moved to block AT&T’s attempted merger with T-Mobile in 2011, citing the need for a fourth nationwide wireless carrier.
According to media reports, the DOJ’s antitrust chief Makan Delrahim is leaning toward rejecting Sprint and T-Mobile’s proposal, as opponents of the merger, including Wireless Internet Service Providers Association (WISPA) and the 4Competition Coalition, continue to publicly denounce it.