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Why Is FCC Chair Supporting Merger between T-Mobile and Sprint?

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May. 24 2019, Published 1:29 p.m. ET

Merger

T-Mobile (TMUS) and Sprint (S) have decided to merge to expand their 5G network and grow their customer base amid declining postpaid phone subscribers and rising competition from the dominant players of the telecom industry and online streaming giants. The merger would also boost cost synergies.

Since the companies have received support from the Federal Communications Commission (or FCC), they are now waiting to get approval from the US Justice Department, which is expected to make its decision in about a month. The deal also got support from Pennsylvania’s Public Utility Commission yesterday and is also awaiting approval from two other state commissions for California and Hawaii.

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FCC chair backs merger

On Monday, the chair of the FCC, Ajit Pai, gave his consent to the much-awaited merger of T-Mobile and Sprint. To get the FCC approval, T-Mobile and Sprint have committed to deploying an extensive 5G network covering 97% of the country’s population within three years of the merger approval and 99% within six years. The 5G coverage should also include 85% of rural Americans in three years and 90% in six years.

The companies also said that the merged company would not raise the prices and instead would offer the same or lower priced plans to its customers for three years following the deal. The wireless carriers would also roll out a new home Internet service, following the agreement. Also, Sprint plans to divest its prepaid phone brand called Boost Mobile.

The FCC chair has also notified the companies that they would have to pay billions of dollars if they do not fulfill the FCC’s conditions. Sprint and T-Mobile have told the regulators that they would pay “voluntary contributions” if the companies do not meet the deadlines.

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