While the Justice Department might have approved of T-Mobile merging with Sprint, several states are still moving forward to block the deal.
Texas is the latest state that has joined more than a dozen states that are suing to stop T-Mobile’s $26.5 billion takeover of rival cellphone company Sprint, arguing that the deal is bad for consumers because it would reduce competition. In fact, the state’s Attorney General, Ken Paxton, is assuming a leadership role with California Attorney General Xavier Becerra and New York Attorney General Letitia James. These three are leading the charge with 12 other AG’s in the United States.
“Whether Americans reside in big states or in small, in rural areas or in urban centers, on the coasts or in the heartland, it is clear that this merger is bad for consumers, bad for workers, and bad for innovation, and our growing momentum clearly continues to make that point,” James said in a statement.
It’s the first Republican attorney general of the group, which now consists of 14 states and the District of Columbia. California, New York and now Texas are leading the states’ case.
The Justice Department approved the deal last week alongside five Republican state attorneys general who were not involved in the states’ case. The federal government’s conditions would make satellite-TV company Dish a new U.S. wireless provider.
Critics worry that the deal would still lead to higher prices and fewer consumer perks because Dish would be a weaker competitor than Sprint currently is. Dish has to build out its network and will start life with only 9 million customers, about one-sixth of Sprint’s subscriber base today.
On Thursday, a federal judge said the trial would start in December, per the states’ request.
T-Mobile has said it will not finalize the Sprint takeover while litigation is ongoing. T-Mobile was expecting to close the deal by the end of the year. CEO John Legere said last week that he wants to work with the states to address their concerns.
The Justice Department last week said that its deal set up Dish to be a “disruptive force in wireless.” Dish has promised that it would build a next-generation “5G” nationwide network by June 2023.
To get it started in wireless, Dish is paying $5 billion for Sprint’s prepaid cellphone brands, including Boost and Virgin Mobile, and some spectrum, or airwaves for wireless service. Dish will also be able to rent T-Mobile’s network for seven years while it builds its own.
But attorneys general from other states and public-interest advocates say that Dish is hardly a replacement for Sprint as a stand-alone company and that these conditions fail to address the competitive harm the T-Mobile-Sprint deal causes: higher prices, job losses, and fewer choices for consumers.
A federal judge still must sign off on the Justice Department settlement. The Federal Communications Commission is expected to also give the takeover its blessing.
Paxton said that his office carefully evaluated the proposed merger and the settlement. In the end, though, he decided that the deal the Justice Department struck isn’t in the best interest of working Texans, who need affordable wireless services. The Justice Department approved the deal on the condition that Sprint will sell its prepaid business to Dish. Also, T-Mobile will have to give Dish “robust access” to its mobile network for seven years. However, Paxton and the other AGs aren’t convinced that the deal with Dish would lead to a fourth competitor to make up for the merger. “[W]e do not anticipate that the proposed new entrant will replace the competitive role of Sprint anytime soon,” Paxton said.
Aside from New York, California and Texas, the other states seeking to block what their Attorney Generals are calling an “anticompetitive merger” are Colorado, Connecticut, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, Virginia, Wisconsin, and the District of Columbia.
How the T-Mobile Sprint Merger Affects Customers
U.S. antitrust regulators have approved T-Mobile’s $26.5 billion takeover of rival Sprint, leaving just three major cellphone companies, while creating a smaller competitor in satellite-TV company Dish.
“With this merger and accompanying divestiture, we are expanding output significantly by ensuring that large amount of currently unused or underused spectrum are made available to American consumers in the form of high quality 5G networks,” Makan Delrahim, assistant attorney general of the DOJ’s antitrust division, said.
While there are still a few hurdles to be cleared for the deal to close, here’s what a combined T-Mobile-Sprint company could mean for you and your cellphone bill.
Here’s how customers could be affected by this:
FOR MOST T-MOBILE AND SPRINT CUSTOMERS
Sprint customers will be eventually transferred to the new T-Mobile, but that transition will take a few years. If you are a T-Mobile customer, you might not see many changes. However, because the goal of the takeover is to roll out a next-generation “5G” network, subscribers of both could ultimately see faster service.
In other words, Sprint subscribers will become T-Mobile customers, and the executives overseeing T-Mobile will lead the combined company.
If you are a customer of Sprint’s prepaid brands — those include Boost Mobile, Virgin Mobile and Sprint prepaid — you will soon become a Dish Network customer.
If you are a T-Mobile customer, don’t expect much to change right away. It will take time for the company to integrate the two wireless networks so that they work well. Behind the scenes, there will be a lot of activity stitching the network technologies and assets of both firms into one.
It’s unclear how long it will take for these changes to go into effect. The deal could still hit a snag if the companies fail to overcome the lawsuit brought by several states that have said the combination could harm people by leaving them with higher cellphone bills.
WHAT ABOUT PREPAID CUSTOMERS?
As part of the deal, Dish will get Sprint’s prepaid business, including Boost Mobile and Virgin Mobile. Even if its network isn’t ready, customers aren’t supposed to see service quality drop, as Dish is going to use T-Mobile’s network until it can run its own.
HOW STRONG IS DISH?
That’s an open question.
Public-interest groups point out that Sprint is an existing company with more than 50 million subscribers. Dish would start from scratch building a network that will cost tens of billions. It gets only 9 million customers from the deal and will have to fight to win more.
As for the network, Dish already owns spectrum, or airwave rights, but hasn’t been using it. Friday’s deal would give Dish additional airwaves that travel far and work well in rural areas. Dish is supposed to put those to use in its own network, but it has to rely on T-Mobile’s network in the meantime. MoffettNathanson analyst Craig Moffett says the set-up suggests Dish won’t have an incentive to set “aggressively” low prices.
Dish says it will offer service to 70 percent of the U.S. population by 2023. But while it’s billed as 5G, Dish is promising speeds that are only slightly higher than what’s typical today.
It may take a while before Dish can challenge the bigger companies in a way that benefits consumers — if it ever does — the way T-Mobile developed a reputation for itself as the “Un-carrier.”
AND FOR VERIZON AND AT&T CUSTOMERS?
T-Mobile was instrumental in pushing the more established players to be more consumer-friendly, doing away with two-year phone contracts and offering unlimited data plans. T-Mobile has offered goodies for its customers like free or discounted Netflix and free international data. With just three major providers, the worry is that there would be less incentive to add services that consumers like or to compete on price.
T-Mobile has promised not to raise prices for three years, but after that, it’s fair game. But T-Mobile CEO John Legere said Friday that the company will continue to be the “Un-carrier” and keep Verizon, AT&T and others on their toes.
It’s best to wait and see what happens to the pricing and quality of service.
T-Mobile still offers some attractive perks, like free international roaming and free in-flight texting with Gogo Wi-Fi, which AT&T and Verizon don’t. So depending on your lifestyle, the No. 3 carrier might still be your best bet.
The good news is that if you decide to switch, it’s not as difficult as it used to be. With the industrywide shift away from two-year contracts and the end of early termination fees, you just have to make sure you have finished paying for your cellphone before making the change.
SO WILL PRICES GO UP OR DOWN?
Most likely, but it’s never that simple. Naturally, opinion is divided. Generally, fewer competitors mean higher prices, which is part of the reason the Department of Justice required the companies to sell part of its business to Dish to keep the number of major wireless providers at four.
“Americans across the country will likely pay higher prices for worse service in a wireless market dominated by AT&T, Verizon, and T-Mobile,” said Barry Lynn, executive director of the Open Markets Institute, a research group that promotes competition. “The problem is especially bad for poor and rural customers.”
But others, including T-Mobile of course, say prices won’t rise and the deal is good for consumers.
“Private industry has every incentive to give American consumers what they want: faster, better, cheaper wireless service,” said Patrick Hedger, research fellow at the Competitive Enterprise Institute, a think tank that favors free markets and limited government intervention.
To understand why, let’s go back to 2013. That was when T-Mobile started a marketing blitz, labeling itself the “uncarrier” — the pro-consumer wireless company. It discontinued traditional two-year wireless contracts, eliminated early termination fees and made international roaming free.
The move won T-Mobile millions of customers from AT&T and Verizon. To compete, Sprint also released promotions that drove down prices of wireless plans. The upshot: Consumer spending on wireless services dropped significantly between 2014 and 2018, according to Chetan Sharma, an independent consultant for the carriers.
After T-Mobile increased its number of customers, it cooled down its promotions. That was when prices began rising again. Over the last few years, T-Mobile moved toward unlimited data plans, which start at $60 a month. In contrast, it had offered tiered data plans with cheaper options, like one that cost $50 a month, years ago.
In total, the average amount spent by wireless customers in the first quarter was $47.50 a month, up slightly from $46 in 2018, Mr. Sharma said. (The numbers look low because they include people who are on cheaper prepaid phone plans.) He added that people still spend less than they did in early 2014, when the average amount spent was $60 a month.
With the merger complete, we can expect prices to continue creeping up. That’s because, for now, AT&T and Verizon will have one less competitor. (While Dish agreed to buy Sprint’s prepaid business, it could take years for it to become a mature No. 4 carrier comparable to Sprint.)
In other countries, prices also rose after large carrier combinations. In India, for example, the number of wireless carriers dwindled to three big companies in 2018, down from about six in 2010 — and prices increased slightly, Mr. Sharma said.
WILL THIS DEAL ACTUALLY HAPPEN?
A federal judge still must sign off on the approval, as it includes conditions for the new company. And 14 attorneys general are suing to stop the deal.
HOW SOON WOULD T-MOBILE AND SPRINT ROLL OUT 5G?
5G is the next generation of wireless service that has become a politically touchy subject. President Donald Trump has said he wants the U.S. to “win” on 5G, particularly against China. It promises faster speeds and opportunities for new technologies.
Both Sprint and T-Mobile have already launched 5G networks in certain cities. They have said they will be able to do it faster and better now than they could individually. They have promised to cover 97 percent of U.S. in three years and 99 percent in six years. T-Mobile had said that it planned to launch a nationwide network by 2020 itself, but didn’t have such specific targets.
WILL WIRELESS SERVICE QUALITY IMPROVE?
For Sprint customers, maybe. Sprint has struggled to gain customers for years because its network was the smallest and least capable, which meant access to cellular phone service and high-speed internet was spotty in some areas.
But we will have to wait and see whether T-Mobile successfully merges Sprint’s network with its own. If all goes perfectly, Sprint and T-Mobile customers will gain access to a broader network on a par with the AT&T and Verizon networks in coverage and speed.
It remains unclear whether customer support quality will get better or worse after the merger. T-Mobile will now have to take on millions more customers coming from Sprint. In anticipation of the influx of new subscribers, T-Mobile said it plans to hire staff for five new customer service centers. But it will take time to train new workers, so in the near term, support quality might be inconsistent.
Supporters of the merger say that the combined company will accelerate the deployment of 5G networks, which are so fast that people can download an entire movie in seconds rather than a few minutes. T-Mobile will now have more resources to implement its 5G technology, which will pressure AT&T and Verizon to deploy their 5G networks more quickly, analysts said.
In the near term, though, 5G won’t have an immediate impact on you. The technology has very limited range, meaning the signals won’t travel very far. And the overwhelming majority of smartphones still work on the 4G network, not 5G.