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FCC chairman Ajit Pai

FCC approves controversial T-Mobile-Sprint merger

Image credit: Reuters/Joshua Roberts

The Federal Communications Commission (FCC) has given final approval to the proposed merger of the third and fourth largest telecoms providers in the US.

T-Mobile (owned by Deutsche Telekom AG) is among the largest international mobile brands in the world and the third-largest in the US, while Sprint is the fourth-largest mobile network operators in the US. The two companies have a combined customer base of more than 100 million people.

In 2017, Reuters reported that SoftBank was considering selling its majority share in Sprint to Deutsche Telekom AG, resulting in an effective merger worth $26.5bn. A merger agreement was announced in April 2018, beginning the process of securing regulatory approval.

The merger was approved by the Department of Justice in July, under the conditions that Sprint sells its subsidiary Boost Mobile and enough of its 800MHz wireless spectrum to make space for competition, T-Mobile makes its network accessible to Dish Network for seven years, and prices are not hiked for at least three years. Later, the merger was endorsed by FCC chairman Ajit Pai.

The proposed merger will controversially reduce the number of key players in the US telecoms space (controlling 98 per cent of the market) from four to three. Critics argue that the merger will harm competition, raise costs for consumers, limit innovation, and lead to loss of jobs and wage stagnation for remaining employees. Attorneys general from 18 states have banded together to file a lawsuit to block the merger, estimating that costs for consumers would rise by $5.4bn annually as a result of the merger. T-Mobile and Sprint countered that the merger would allow for them to expand broadband and compete more effectively with A&T and Verizon on 5G technology, agreeing to deploy 5G infrastructure to serve 97 per cent of the US population within three years of closure.

Now, the FCC has voted 3-2 along party lines to approve the T-Mobile and Sprint merger; chairman Pai and his two Republican colleagues gave their approval, while the two Democratic commissioners voted against the merger.

In a public statement explaining her decision, Democratic Commissioner Jessica Rosenworcel said: “We’ve all seen what happens when markets become more concentrated after a merger like this one. In the airline industry, it brought us baggage fees and smaller seats. In the pharmaceutical industry, it led to a handful of rug companies raising the prices of lifesaving medications. There’s no reason to think this time will be different.”

Fellow Democratic Commissioner Geoffrey Starks wrote in his own statement: “You don’t need to be an expert to know that going from four wireless carriers to three will hurt competition. This merger takes a bad situation and makes it worse. Higher prices and fewer options across the country will inevitably result. Quite simply, the effects of this ill-conceived merger will hit low-income and rural communities hardest of all.”

None of the Republican commissioners released public statements on the merger.

The final hurdle faced by Sprint and T-Mobile is the legal challenge raised by the coalition of Attorneys General, which is expected to be heard in December.

The FCC under Trump appointee and former Verizon lawyer Ajit Pai has been criticised by Democratic lawmakers and consumer rights groups for allegedly putting the interests of industry ahead of consumer interests, such as with the repeal of Obama-era net neutrality regulations.

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