The dust is beginning to settle around the latest development in the long-gestating merger betwen Sprint and T-Mobile, and just about everyone has something to say about it.
"Today was a huge victory for this merger... and now we are FINALLY able to focus on the last steps to get this merger done!" cheered T-Mobile CEO John Legere in a release.
Legere was celebrating a judge's decision not to block the proposed merger. A group of state attorneys general had banded together to file a lawsuit seeking to block the transaction, but Judge Victor Marrero of the U.S. District Court for the Southern District of New York rejected that argument. According to Cnet, the states are now considering an appeal of his ruling.
The judge's logic
In his 173-page filing on the matter, Judge Marrero offered his reasoning for approving the transaction:
"Having been tasked with predicting the future state of the national and local RMWTS [retail mobile wireless telecommunications services] markets both with and without the merger, and relying on both the evidence at trial and the various judicial tools available, the Court concludes that the proposed merger is not reasonably likely to substantially lessen competition in the RMWTS markets. Despite the strength of Plaintiff States' prima facie case, which might well suffice to warrant injunction of mergers in more traditional industries, a variety of considerations raised at trial have persuaded the Court that a presumption of anti-competitive effects would be misleading in this particularly dynamic and rapidly changing industry. T-Mobile has redefined itself over the past decade as a maverick that has spurred the two largest players in its industry to make numerous pro-consumer changes. The proposed merger would allow the merged company to continue T-Mobile's undeniably successful business strategy for the foreseeable future."
Continued Judge Marrero: "While Sprint has made valiant attempts to stay competitive in a rapidly developing and capital-intensive market, the overwhelming view both within Sprint and in the wider industry is that Sprint is falling farther and farther short of the targets it must hit to remain relevant as a significant competitor.
"Finally, the FCC and DOJ have closely scrutinized this transaction and expended considerable energy and resources to arrange the entry of Dish as a fourth nationwide competitor, based on its successful history in other consumer industries and its vast holdings of spectrum, the most critical resource needed to compete in the RMWTS markets," the judge wrote. "Dish's statements at trial persuade the court that the new firm will take advantage of this opportunity, aggressively competing in the RMWTS markets to the benefit of price-conscious consumers and opening for consumer use a broad range of spectrum that had heretofore remained fallow."
Summarized the judge: "The Court remains fully mindful that among its various likely prospects, one possibility a merger of this magnitude raises is that of a less competitive future in the RMWTS markets. However remote, that concern must be taken seriously. The Court, however, does not believe that such a possibility is reasonably likely in light of the numerous considerations discussed above."
With this latest development, Sprint and T-Mobile now hope to close their proposed merger by April 1. The companies still face a possible appeal by the state attorneys general. They also still must obtain approval from the California Public Utility Commission, as well as a judge's review of the Department of Justice's approval of the transaction. They are also expected to update the financial terms of the merger, given Sprint's flagging business.
Plenty of opponents remain
Nonetheless, a wide range of players voiced their disagreement with Judge Marrero's approval of the proposed merger.
"We are profoundly disappointed that the judge approved a merger that will harm communities of color and low-income communities across California," said Greenlining Institute Technology Equity Director Paul Goodman, in a statement.
"While the court may think it unlikely for a newly entrenched trio of enormous wireless carriers to collude rather than compete, the history of broken and abandoned merger promises from these companies – to say nothing of the mountains of evidence and expert analysis in this trial – say otherwise," said Free Press Vice President of Policy and General Counsel Matt Wood, in a statement.
"The Rural Wireless Association disagrees with Judge Marrero's decision to approve this deal, which has been consistently and drastically altered from what was originally proposed in early 2018, and now includes Dish, a company that has zero experience operating as a facilities-based mobile wireless carrier network as the savior for wireless competition," the association said in a statement.
Others, not surprisingly, applauded the judge's decision.
"I'm pleased with the district court's decision. The T-Mobile-Sprint merger will help close the digital divide and secure United States leadership in 5G," said FCC Chairman Ajit Pai in a statement.
"We appreciate Judge Marrero's thorough evaluation of this merger. The ruling, in addition to the DOJ and FCC approvals, accelerates our ability to deploy the nation's first virtualized, standalone 5G network and bring 5G to America," said Dish Network's Charlie Ergen in a statement. "We are eager to begin serving Boost customers while aggressively growing the business as a new competitor, bringing lower prices, greater choice and more innovation to consumers. We look forward to the Boost employees and dealers joining the Dish family.
Debating the winners and losers
And analysts noted the merger – if it overcomes a few remaining legal obstacles – would have serious implications for a number of companies across the mobile industry.
"This is clearly a big win for T-Mobile, which will now how [sic] a superior spectrum position which it can use to launch 5G and handle even higher growth," wrote the Wall Street research analysts at Lightshed in a post. "We also see this as a big win for Dish based on what we have learned about its MVNO terms. It's not great news for Verizon, given that it removes Sprint and Dish's spectrum as an alternative, created a new competitor in Dish and has empowered T-Mobile with the tools to deliver a superior network experience to consumers."
In a somewhat surprising public statement, Verizon though sought to counter the notion that it might be affected by the combination of the nation's third- and fourth-largest wireless network operators. "For the past two years, while these companies focused on a merger, Verizon has remained focused on what we've done for the past 20 years – providing customers with the nation's most reliable wireless network," the operator wrote in a statement. "Regardless of what happens when these two companies eventually get together, our customer-focused mission remains the same."
Nonetheless, other Wall Street analysts agreed that Verizon and AT&T ultimately would face challenges from a bigger T-Mobile.
"We view a deal as initially negative to AT&T/Verizon despite our view that consolidation should help to further rationalize the competitive/pricing environment longterm considering T-Mobile is likely to be aggressive at least early on to help validate the premise of the deal which is it will result in more favorable pricing for consumers," wrote the Wall Street analysts at Cowen in a note to investors.
Cable companies too are expected to feel heat from a combined Sprint and T-Mobile
"The wireless industry is going to get tougher. Cable would have had a much easier time sucking subscribers out of Verizon and AT&T in a four-carrier market with a capacity constrained T-Mobile. Now they are going to have to fight T-Mobile for every one of those subs, and industry pricing is likely headed lower," wrote the Wall Street analysts at New Street Research in a note to investors.
However, the New Street analysts pointed out that cable companies may also see some silver lining in the merger of Sprint and T-Mobile, if it is ultimately approved. "Cable will have one more company competing for its MVNO business. We have been surprised the companies haven't announced new MVNO terms with Verizon or AT&T; negotiations were in full force in October / November last year. Perhaps they have been waiting to see what T-Mobile might offer them if the deal went through. Altice will be the most immediate winner; their MVNO with Sprint now moves to a much better network."
Finally, most view Dish's situation as fraught with equal parts peril and opportunity, given that it's positioned to obtain prepaid customers, tower sites and other assets from the combination of Sprint and T-Mobile. "Dish will need to execute on a myriad of levels including building a cloud-native nationwide network followed by the operational challenges that come with competing against three very well entrenched wireless players," wrote the Wall Street analysts at Cowen.