Merging America's 5G Mobile Network

Following years of negotiations and various roadblocks, the Sprint and T-Mobile merger cleared its last big hurdle in federal court last month. (Laurel Wamsley, NPR) The “mega-merger” was announced in April 2018 but faced immediate backlash. The attorney generals of New York, California, the District of Columbia, and ten other states protested the potential merger as an anti-competitive practice. (Laurel Wamsley, NPR) The states argued the reduction of carriers in the telecom market creates less market competition, limits fair and free choice for consumers, and harms workers in this industry. (Id.)

However, U.S. District Court Judge Victor Marrero disagreed. The court held that the merger "is not reasonably likely to substantially lessen competition" in the telecom market and will not harm consumers. (State of New York v. Deutsche Telekom AG) Additionally, the court rejected the states’ arguments, finding the DOJ’s conditions for introducing Dish as an alternative 5G network sufficient to maintain market competition. (Christian de Looper, Digital Trends)

The Federal Communications Commission and DOJ’s Antitrust Division welcomed the court’s ruling, as Judge Marrero’s decision noted that the DOJ deserves a degree of deference. (Deutsche Telekom AG at *112) The Department’s Antitrust Division Chief, Makan Delrahim, marked the ruling as critical to recognizing the government’s power to settle cases and maintaining certainty in the market for procompetitive mergers and acquisitions. (Department of Justice, Office of Public Affairs Justice News) Delrahim’s commentary alluded to a potential flood of litigation had Judge Marrero diverged from the DOJ, potentially allowing litigants “fifty-two whacks at the piñata” for every regulatory transaction. (Squawk Box, CNBC)

The ruling does not bar states from bringing similar actions in the future, nor does it bar the thirteen attorneys general from appealing this decision. (Christian de Looper, Digital Trends) However, it may force states to think twice in the future, before expending resources to question a federal agency’s action. Delrahim further commented that these types of state actions should be limited to situations in which the DOJ has not acted and when a state experiences localized effects of a transaction. (Squawk Box, CNBC)

Yet, states may already be reaching that point. Communications Workers of America (CWA) issued a statement shortly after the court’s ruling exposing T-Mobile’s immediate lay-offs. (Monica Alleven, FierceWireless) CWA argues the merger could potentially cause 30,000 people to lose their jobs. (Amy Fetherolf, CWA Press Release) As Sprint will be absorbed into T-Mobile, the fear of redundancy worries telecom workers. Executives promised Sprint employees that they would retain their jobs but declined to comment on the future of other dealers like Metro PCS and prepaid brands like Boost. (Monica Alleven, FierceWireless) T-Mobile and Sprint are already seeing immediate stock profits, but the DOJ suspects consumers won’t see the anticipated benefits, like faster 5G speed and lower prices, for at least another 12-16 months. (Squawk Box, CNBC)

In early March, the California Public Utilities Commission (CPUC) released a proposal to approve the merger, which is now open to the public through notice and comment. (Monica Alleven, FierceWireless) Section 854 of the Public Utilities Code requires CPUC authorization for any merger involving public utilities, so the CPUC’s recent go-ahead is significant. (CPUC, Section 854(a)) However, the Commission’s approval is conditional upon terms such as appointing an independent compliance monitor, creating at least 1,000 new jobs in California alone, and providing 5G to the state’s rural population. (Monica Alleven, FierceWireless)

Overall, it appears Sprint and T-Mobile are well on their way to reshaping the telecom industry. Future “mega-mergers” need not worry about judicial opposition, as this case demonstrates, the real roadblocks come from regulators, not courts.