DoJ approves T-Mobile-Sprint merger after USD5bn DISH deal sealed

29 Jul 2019

T-Mobile US and Sprint have entered into a ‘consent decree’ with the US Department of Justice (DoJ) regarding their planned merger, bringing the deal one step closer to completion. Running in parallel, the cellcos have sealed a wide-ranging deal with satellite TV giant DISH Network, which will see them divest Sprint’s pre-paid businesses and 800MHz spectrum assets (see below) for a total of USD5 billion. The transactions with DISH are contingent on the successful closing of T-Mobile’s merger with Sprint, the parties have noted. The USD43 billion target in previously announced synergies from T-Mobile/Sprint merger remains unchanged, despite the divestment, T-Mobile has stated.

The DISH deal includes the following agreements:

· Effective upon the successful completion of T-Mobile’s merger with Sprint, the ‘New T-Mobile’ will be committed to divest Sprint’s pre-paid businesses, including Boost Mobile, Virgin Mobile and Sprint-branded pre-paid customers (but excluding the Assurance-branded ‘Lifeline’ customers and the pre-paid wireless customers of Shenandoah Telecommunications Company and Swiftel Communications) for approximately USD1.4 billion. These brands serve approximately 9.3 million customers in total.

· Upon closing the pre-paid divestiture, Boost Mobile, Virgin Mobile, and Sprint-branded pre-paid customers, as well as new DISH wireless customers, will have full access to the legacy Sprint network and the New T-Mobile network in a phased approach. Access to the New T-Mobile network will be through an MVNO arrangement, as well as through an infrastructure MNO arrangement enabling roaming in certain areas until DISH’s 5G network is built out.

· The New T-Mobile will offer standard transition services arrangements to DISH for up to three years following the close of the divestiture transaction. The transition services provided by the New T-Mobile will result in the orderly transfer of pre-paid customers to DISH and will also ensure the continued and seamless operation of Boost Mobile, Virgin Mobile and Sprint-branded pre-paid businesses following transition to DISH’s ownership.

· DISH has agreed to acquire Sprint’s portfolio of nationwide 800MHz spectrum for a total value of approximately USD3.6 billion in a transaction to be completed, subject to certain additional closing conditions, following an application for Federal Communications Commission (FCC) approval to be filed three years following the closing of T-Mobile’s merger with Sprint. This will permit the New T-Mobile to continue to serve legacy Sprint customers during network integration, pending later FCC approval of the license transfer. The companies have also entered into an agreement providing the New T-Mobile the option to lease back a portion of the spectrum sold to DISH for an additional two years following closing of the spectrum sale.

·Following the closing of T-Mobile’s merger with Sprint – and subsequent integration into the New T-Mobile – DISH will have the option to take on leases for certain cell sites and retail locations that are decommissioned by the New T-Mobile for five years following the closing of the divestiture transaction, subject to any assignment restrictions.

· Finally, the companies have also committed to engage in good faith negotiations regarding the leasing of some or all of DISH’s 600MHz spectrum to T-Mobile.

The completion of the T-Mobile and Sprint combination remains subject to remaining regulatory approvals and certain other customary closing conditions. T-Mobile and Sprint expect to receive final federal regulatory approval in 3Q19 and currently anticipate that the merger will be permitted to close in the second half of 2019.