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T-Mobile-Sprint Merger Is Approved by Justice Dept., Clearing Major Hurdle

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The Justice Department on Friday approved the merger of T-Mobile and Sprint, the third- and fourth-largest wireless companies in the United States, moving the deal one crucial step closer to completion years after the two carriers first explored joining forces.

Under the terms of the deal, T-Mobile, the larger of the two companies, would pay roughly $26 billion in stock to absorb Sprint, which has struggled in recent years. The combination would reshape the wireless industry and create a formidable rival to AT&T (No. 1 in the United States) and Verizon (No. 2).

The new company, to be called T-Mobile and led by T-Mobile’s chief executive, John Legere, would have more than 100 million customers. That kind of reach would put the carrier in a league with AT&T, which has over 150 million subscribers, and Verizon, which has about 118 million.

Mobile services have become household staples, and telecommunications providers have become important players in the nation’s efforts to build out next-generation cellular technology, a stated priority of the Trump administration. As a result, the proposed deal has attracted a high level of scrutiny from federal regulators and state officials.

The merger required the approval of the Justice Department, which enforces antitrust law, and the Federal Communications Commission, which oversees the telecommunications industry. In May, Ajit Pai, the F.C.C. chairman, signaled his support after the companies committed to investing in rural broadband service and the fifth generation of cellular networks, known as 5G.

The deal has one more obstacle to overcome: a lawsuit brought by several states trying to block the transaction. Attorneys general for 13 states have said that the combination could harm consumers by reducing competition and leaving them with higher cellphone bills.

The Justice Department gave its approval after the two companies agreed to sell off parts of their businesses to the pay-TV operator Dish to create a potential fourth major player in the wireless industry.

Makan Delrahim, the head of the Justice Department’s antitrust division, said in a statement on Friday that, under the agreement’s terms, “Dish is in a unique position to succeed.”

Mr. Delrahim added that he would have supported the lawsuit filed by the state attorneys general if the two companies had not agreed to the deal with Dish. “Without the remedy,” Mr. Delrahim said at a briefing for reporters on Friday, “we would agree with the states that this deal should be blocked.”

In the smaller deal, T-Mobile and Sprint this week reached a $5 billion agreement with Dish to hand over Sprint’s prepaid wireless businesses, including Boost Mobile, which is popular with lower-income customers, and some of its airwaves, known as spectrum. The acquisitions give Dish an opportunity to become a major carrier.

Mr. Legere, T-Mobile’s leader, has been the deal’s primary pitchman, lobbying legislators and promoting the merger to his 6.2 million Twitter followers. T-Mobile’s majority owner, the German telecommunications giant Deutsche Telekom, will own a non-controlling but significant stake in the newly merged business.

T-Mobile and Sprint have pledged to build out 5G technology, which brings faster-than-broadband speeds through the air, a centerpiece of their argument for why the merger should be approved. The companies have said they would have a more difficult time making progress in that area as separate businesses.

In addition to extending reliable internet access to rural areas, 5G is expected to fuel the development of autonomous cars and other so-called moonshot projects. President Trump has argued that the technology is critical to national security, citing its importance in his administration’s crackdown on the Chinese telecommunications giant Huawei.

Mr. Legere, 61, and his counterpart at Sprint, the executive chairman Marcelo Claure, 48, were once bitter rivals who frequently took shots at each other in television ads and on social media. They embarked on a lobbying offensive more than a year ago, after announcing that they had reached a deal to bring the two companies together.

[T-Mobile and Sprint attacked each other for years before they decided to team up.]

Mr. Legere made numerous visits to the F.C.C. and the Justice Department, documenting his activity on social media. A month after the deal was announced, Mr. Claure was a host of a fund-raiser for Representative Marsha Blackburn, a Tennessee Republican who was running for Senate. Ms. Blackburn, a longtime supporter of the telecommunications industry, was elected to the Senate in November.

Several lawmakers expressed misgivings over Mr. Legere’s Washington visits, noting the dozens of times that he and other T-Mobile executives have stayed at the Trump International Hotel. The companies have denied doing anything inappropriate to curry favor with federal officials.

The approval of the Justice Department and the F.C.C. does not mean the merger is a done deal. In a rare move last month, attorneys general for 13 states and the District of Columbia threw a new obstacle in its path by suing to block it. The action opens a potential new front in regulation beyond Washington’s purview.

Led by New York and California, the states argued that the merger would lead to higher prices for consumers, because it would reduce the number of major wireless providers. The Justice Department’s approval was predicated on the resolution of that same concern, and the move to bulk up Dish was meant to address that issue.

Senator Amy Klobuchar of Minnesota, a Democratic candidate for president, issued a statement on Friday saying that the agreement did not do enough to protect consumers and failed to address the concerns she raised with the Justice Department when it was first announced.

“It looked like a bad deal then, and it looks like a bad deal today, despite the parties’ promises and this proposed consent decree,” she said.

Ms. Klobuchar is among the critics who contend that the agreement with Dish may not create a legitimate competitor, because the satellite service would effectively be marketing T-Mobile’s service under a different banner. The addition of the Boost service to Dish’s offerings would give it approximately nine million wireless customers, and it would have to operate on T-Mobile’s network. The cable operators Charter and Comcast have similar arrangements with Verizon.

Over time, Dish could create a fully owned network making use of its spectrum licenses and the newly acquired airwaves from T-Mobile. But building that infrastructure is costly, and Dish has been steadily losing subscribers to cheaper streaming services.

The Justice Department’s blessing for the merger of T-Mobile and Sprint relies on the future actions of Dish, a company with a history of violations that is controlled by the billionaire Charles Ergen, an expert poker player and tough negotiator. Dish, a party to the agreement, would be subject to millions of dollars in fines if it failed to build out its cellular service, Mr. Delrahim said.

In a separate statement, Dish said it would voluntarily pay a fine of up to $2.2 billion if it failed to deploy a 5G network covering at least 70 percent of the country’s population in the next four years.

The Justice Department and the F.C.C. will monitor Dish to enforce the agreement, amounting to what is known as a behavioral remedy where federal regulators watch over a for-profit business. In previous merger deals, Mr. Delrahim has criticized such arrangements. On Friday, he said that the strictures placed on Dish did not amount to a behavioral remedy, largely because the agencies will oversee only Dish’s initial build-out of the project and will step back after the network begins operating.

The deal will probably buoy the fortunes of Sprint’s majority owner, SoftBank, the giant Japanese investment group led by Masayoshi Son. Sprint has been losing money for more than a decade and has debts of nearly $40 billion. If the deal does not reach completion, Mr. Son would have to find another buyer for Sprint.

Mr. Delrahim has had to review a flurry of mergers since moving into the top antitrust job in 2017. He sued AT&T, unsuccessfully, to block it from buying Time Warner. Around the same time, he approved the Walt Disney Company’s deal to acquire the bulk of Rupert Murdoch’s 21st Century Fox a scant six months after the transaction was announced. It was a speedy turnaround for an acquisition that would normally take at least a year.





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