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Home / Business / The T-Mobile and Sprint deal wins the Justice Department OK thanks to Dish

The T-Mobile and Sprint deal wins the Justice Department OK thanks to Dish


T-Mobile and Sprint become one.

Josh Miller / CNET

After more than a year of regulatory battles, T-Mobile's $ 26.5 billion takeover of Sprint is close to happening. Justice Department antitrust chief Makan Delrahim said Friday that the DOJ will approve the deal because T-Mobile parents Deutsche Telekom signed an agreement to sell more Sprint assets to Dish Network and create a new nationwide wireless carrier. [1

9659005] Under the agreement, Dish will acquire Sprint's 800Mhz wireless spectrum, Sprint's prepaid brands – Boost, Virgin Mobile and Sprint prepaid – and their combined 9.3 million customers, as well as network agreements that allow Dish to use T-Mobile's network for seven years it is expanding its own 5G network.

T-Mobile and Sprint will also need to give Dish access to "at least 20,000 cell areas" as well as "hundreds of store locations." In a joint press release, T-Mobile and Sprint say that Dish will be able to "take out leases for certain cell sites and store locations closed by New T-Mobile for five years" after the sale is closed.

Dish will pay T-Mobile approximately $ 5 billion for the assets it acquires: $ 1.4 billion for the prepaid businesses and $ 3.6 billion for the spectrum.

The move can reshape the wireless industry and shake up where you get your wireless service. The agreement gives Dish the tools to quickly enter the wireless business by accessing T-Mobile's network. T-Mobile, meanwhile, will combine with Sprint to create a much tougher competitor for AT&T and Verizon in the US wireless market. T-Mobile has claimed that the combination with Sprint will oversee its distribution of 5G across the country, as well as expanding its reach and scale to match Big Two: AT&T and Verizon.

At the close of the deal, as T-Mobile says it expects it to be in the second half of 2019, and Sprint's prepaid businesses and customers will "immediately move to Dish, so will the more than 400 employees and nationwide independent retail network that supports more than 7500 outlets, "Dish said in a statement.

Some questions remain about Dish's legitimacy as a wireless player – one of the primary concerns of state attorneys who have sued to block merger. But CEO John Legere offered a rare defense of an outside company.

"Dish will be a very credible disruptive fourth player," Doctors said in a conversation with analysts and media on Friday.

Double impact

Exactly when Dish wants to enter the market, however, is unclear as it must wait for the completion of the T-Mobile-Sprint merger before it can take on the disposed assets. However, the company says it will have a "5G broadband network that can serve 70 percent of the US population by June 2023."

T-Mobile Chief Technology Officer Neville Ray said Dish and the other wireless retailers will be able to access the upcoming 5G network right away. A decade ago when 4G was on the rise, carriers were protective of the then-new network and prevented so-called mobile virtual network operators from using it. In the same way, the company will honor all Sprint dealership agreements, including an agreement with cable provider Altice.

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Dish has long sought to enter the wireless business. It has collected billions of dollars worth of wireless airwaves in recent auctions in the spectrum, with a deadline in March 2020 to use it or risk losing the license. Dish previously said it was working with a wireless band for "Internet of Things" devices – such as smart thermostats, energy meters, traffic lights and security systems – even though that network is not designed for mobile phones and tablets.

As part of the deal it made with DOJ and T-Mobile, Dish says it "has requested that their spectrum licenses be changed" to reflect the new promise to distribute a 5G network covering 70 percent of the population by June 2023.

Dish has given many promises for a possible 5G wireless network. But through the T-Mobile agreement, it will be able to offer wireless call, text and data services on the combined T-Mobile-Sprint network while expanding its own service.

Dishwasher could follow in Sprint's footsteps with aggressive offers to try to keep subscribers away from the new Big Three, but that play did not work for Sprint in the long run. But in recent years, both Sprint and T-Mobile put pressure on AT&T and Verizon with unlimited data plans, cheaper monthly rates and packages that subscribed to services such as Netflix, Hulu, Spotify, Tidal and Amazon Prime.

Friday's "development is the fulfillment of more than two decades of work and more than $ 21 billion in spectrum investments intended to transform DISH into a connection company," said Dish co-founder and chairman Charlie Ergen in a statement. Taken together, these opportunities will set the stage for our entry as the country's fourth facility-based wireless competitor and accelerate our efforts to launch the country's first standalone 5G broadband network. "

In the meantime, T-Mobile gets the size and customer base to better compete with its larger competitors. The telecom business has been dependent on scale, with a larger subscriber base financing investments in network upgrades. T-Mobile will retain Sprint's 2.5 GHz spectrum, the radio waves Sprint is already using to distribute 5G in five cities across the country. It's a valuable spectrum as the company looks to roll 5G to a wider part of the country.

"With this merger and the related disposal, we are expanding production significantly by ensuring that large quantities of currently unused or underused spectrum are made available to US consumers in the form of high quality 5G networks, "said Delrahim.

Price Changes?

When asked if this agreement would lead to an end to an era of aggressive campaigns and cheaper plans, T-Mobile Chief Officer Mike Sievert rejected the idea.

"We're coming to take that enhanced ability and go after AT&T and Verizon that they've never seen before, "he said.

T-Mobile has agreed to lock prices over the next three years, even though it has not talked about Sprint's plans. Legere hinted at great things to come.

"We will not waste time making it clear what this network is capable of," he said, also dismissing the notion that T-Mobile would be fat and arrogant like its rivals.

Sievert also reiterated the company's plans to finally offer 100 megabits per second to cover 99% of Americans, and Ray talked about his existing plans to offer nationwide 5G by next year.

The challenges still lie

While the DOJ decision smooths the path for the T-Mobile-Sprint agreement, it is not signed, sealed and delivered yet.

Thirteen state attorneys, as well as the District of Columbia, have filed a multistate lawsuit to block the T-Mobile-Sprint agreement on the grounds that it will result in higher prices and less competition. Although the new agreement paves the way for Dish to replace Sprint as a fourth wireless carrier, it remains to be seen whether the states will continue to pursue its legal action.

In addition to mediating an agreement between T-Mobile and Dish, the DOJ also reached a settlement with five state attorneys headquarters: Nebraska, Kansas, Ohio, Oklahoma and South Dakota.

It has not yet reached an agreement with New York or California, which is leading the lawsuit against the merger. In a statement issued by New York State Attorney Letitia James, the group of 13 states, as well as the District of Columbia, intensified their opposition to the deal, citing Dish's previously broken promises and its confidence in using T-Mobile's network for "for the foreseeable future."

"The promises made by Dish and T-Mobile in this agreement are the kind of promises that only strong competition can guarantee," James said in a statement . "We have serious concerns that cobbling together this new fourth mobile player, with the government choosing winners and losers, will not address the merger damage to consumers, workers and innovation."

"A marketplace with fewer active competitors drives up costs, reduces consumer choice and hinders innovation," said California State Attorney Xavier Becerra. "We intend to be prepared to go to trial to fight for a fair, competitive and fair marketplace for consumers across the country."

The California Public Utilities Commission also needs to bless its deal, and a report on Wednesday said that cable giant Charter wanted to bid on Sprint assets, but never heard back from the DOJ . It is unclear what potential implications news may have on T-Mobile's agreements with both Sprint and Dish.

During the conversation, Doctors said that the priority is to work out the concerns of the state AGs as well as the California Commission. Sievert said the companies would not proceed with the agreement without closing the lawsuit first.

Different technologies

There is also the wrinkle of having to integrate two networks with different technologies. T-Mobile has a mix of 5G, 4G LTE and 3G based on GSM technology. Sprint, meanwhile, has 5G, 4G LTE and a 3G technology called CDMA.

Working in the companies favor: Many popular 4G handsets, including newer iPhones and Galaxy phones, pack support for both carriers' networks. Google's Project Fi is already switching seamlessly between T-Mobile and Sprint for its mobile service.

But we have also seen what happens when integrations are not handled properly. Sprint tried disastrously to combine both network technologies when it merged with Nextel in 2005. T-Mobile faced a similar scenario when it purchased MetroPCS, which also used CDMA technology. But under T-Mobile technology chief Neville Ray, T-Mobile customers smoothly transferred from the old network.

Of course, this will all happen on a much larger scale with Sprint, which has 54.5 million customers to join T-Mobil's 83.1 million.

The story was originally published at 20:30 PT.
Update, 11:50 am PT: To include further comments and background from management.

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