T-Mobile and Sprint merger

The merger of telecom rivals T-Mobile (TMUS) and Sprint (S) was announced on April 29, 2018, but it’s facing difficulty due to regulatory hurdles by the antitrust division. Notably, the companies recently agreed to deploy the 5G network to the most rural areas possible and not increase their prices for three years to get the approval of the Federal Communications Commission. Sprint has also agreed to sell off its prepaid phone service, Boost Mobile.

Meanwhile, the companies believe that the combined entity would strengthen its customer base, improve the 5G network scale, and boost cost synergies.

Why Department of Justice Is Worried about Sprint-T-Mobile Merger

Merger hurdles

The US Department of Justice (or DoJ) says the potential $26.5 billion merger would reduce the count of US wireless carriers from four to three, including the newly merged company “New T-Mobile,” Verizon, and AT&T. The US federal regulators also remain concerned that the merger might hurt competition in the pay-as-you-go wireless market.

Most recently, the staff of the DoJ has reportedly recommended the antitrust agency to block the potential deal, as they believe that the combined entity would attract customers by cutting price and thus harm the competition. Notably, the DoJ generally follows staff advise, as they are experienced in their jobs. However, their suggestions are overruled sometimes.

According to the staff at the antitrust division, T-Mobile tends to aggressively cut prices of its services to pull customers away from market leaders Verizon and AT&T. Currently, T-Mobile has around 80 million customers, while Sprint has about 55 customers.

Now it is on the chief of the Justice Department to decide the fate of the companies. The decision is anticipated to come in about a month.

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