T-Mobile US Inc.’s deal for Sprint Corp. is finally close to becoming reality.
The Department of Justice is expected to approve the telecom deal in the coming days, according to reports[1], clearing a major hurdle for the carriers and setting the stage for a shake-up of the U.S. wireless industry. T-Mobile TMUS, -2.86%[2] and Sprint S, -7.16%[3] announced their intent to merge last spring, in a deal valued at $26 billion, though the combination requires clearance from regulators.
T-Mobile and Sprint have given numerous reasons for their pending marriage, arguing that it would make the U.S. a more formidable player in the 5G era[4] amid U.S. government concerns about the security of China’s Huawei Technologies Co. Sprint in particular has argued that its network isn’t strong enough for the company to survive on its own once 5G becomes the prevailing wireless standard, but T-Mobile expects that Sprint’s spectrum will prove useful to its growth plans.
Wireless investors are hoping that the two U.S. wireless carriers will have more pricing power in the new industry structure, but it remains to be seen how much leverage a combined T-Mobile and Sprint will have.
Here are five things to know about the pending merger:
With a few conditions...
T-Mobile and Sprint will reportedly have to abide by certain DOJ conditions in order to gain deal approval. Namely, Sprint may be forced to sell about $6 billion in spectrum and also shed its Boost Mobile prepaid phone business to avoid concerns about stifling competition. The company might also need to sell its Virgin Mobile brand.
By stipulating these divestitures, the DOJ would be leaving room for a fourth wireless carrier to emerge in Sprint’s absence to maintain competitive pressure on the remaining players. Dish Network Corp. DISH, -0.20%[5] is thought to be the leading bidder for these assets.
Dish, which tried to scoop up Sprint itself back in 2013, has been buying up spectrum over the past 10 years, making the company the best positioned to become a fourth competitor, according to Larry Downes, a project director at the Georgetown Center for Business and Policy. But Dish may not emerge as the wireless player that the DOJ wants it to be, he told MarketWatch, as the company could decide to simply become a wireless wholesaler, reselling network capacity in areas where retail carriers don’t have their own capacity.
Often in the case of...