FCC chairman approves Sprint-T-Mobile merger; company must offload Boost Mobile

21 May 2019

T-Mobile US and Sprint have informed the Federal Communications Commission (FCC) that they will take a ‘series of significant steps’ if their merger application is granted regulatory approval, and in doing so have won over FCC chairman Ajit Pai. Pai responded to these new commitments with the following statement: ‘In light of the significant commitments made by T-Mobile and Sprint as well as the facts in the record to date, I believe that this transaction is in the public interest and intend to recommend to my colleagues that the FCC approve it. This is a unique opportunity to speed up the deployment of 5G throughout the United States and bring much faster mobile broadband to rural Americans. We should seize this opportunity.’

One of the most eye-catching aspects of the new agreement is the enforced divestment of Sprint’s pre-paid unit Boost Mobile, in an effort to allay fears regarding the impact of the merger on the pre-paid sector. T-Mobile must identify a ‘serious and credible buyer’ for Boost within 120 days of closing the merger. T-Mobile will offer the Boost buyer terms for a six-year wholesale MVNO agreement that will include wholesale rates that will meaningfully improve upon the commercial terms reflected in the most favourable of T-Mobile and Sprint’s three largest MVNO agreements. (Note: Boost Mobile first launched in 2001 over the Nextel network, before being acquired by its host in 2003. In 2005 Sprint merged with Nextel and preserved Boost as a pre-paid unit.)

In terms of coverage obligations, the companies have committed to deploying a 5G network that would cover 97% of the US population within three years of the closing of the merger and 99% of Americans within six years. This 5G network must also cover 85% of rural Americans within three years and 90% within six years. Additionally, T-Mobile and Sprint have guaranteed that 90% of Americans will have access to mobile broadband services at speeds of at least 100Mbps and 99% would have access to speeds of at least 50Mbps.

As previously reported by TeleGeography’s CommsUpdate, in April 2018 T-Mobile and Sprint entered into a definitive agreement to merge in an all-stock transaction. They seek to create a company which will be 41.7% owned by T-Mobile’s parent Deutsche Telekom (DT, which would have overall control) and 27.4% owned by Sprint parent SoftBank Group Corp, with the remaining 30.9% in free float. The long-running merger continues to face opposition from the Department of Justice (DoJ) however, which believes that the concessions are not sufficient to resolve its concerns.