10 Oct

T-Mobile-Sprint Merger: Mississippi Leaves Lawsuit

WRITTEN BY Vineet Kulkarni

Mississippi, once a critic of the T-Mobile (TMUS) and Sprint (S) merger, now backs it. T-Mobile persuaded it with some specific commitments benefiting the state. So, Attorney General Jim Hood agreed to withdraw from the multistate lawsuit and now supports the merger.

Mississippi backs the T-Mobile–Sprint merger now

Under these commitments, T-Mobile agreed that the combined entity would deploy a 5G network in Mississippi, giving high-speed connectivity to at least 62% of the state’s general and rural population within three years of the merger closing. Within six years of closing, the network would cover 88% of the state’s rural population and 92% of the general population.

Only 2% of Mississippians would have benefited from T-Mobile’s standalone 5G services. Hood affirmed that new stores would open in rural areas and that there would be no retail job losses.

Mississippi was one of the states opposing the T-Mobile–Sprint merger. However, after these commitments, it withdrew from the lawsuit and now supports the merger. Led by New York and California, 16 remaining states are trying to block the T-Mobile–Sprint merger on antitrust concerns. The trial is slated to begin on December 9. Whether other states in this group follow Mississippi remains to be seen.

Majority support at the FCC for merger

Based on Bloomberg’s report on October 4, the deal received majority support—a third “yes” vote at the FCC. Three members of the five-member committee, all Republicans, have voted in favor of the deal. The remaining two Democrats have not cast their votes yet.

Last week, Florida State Attorney General Ashley Moody showed her support of the T-Mobile-Sprint merger. Florida became the seventh state to back the merger, following Ohio, Kansas, Louisiana, Nebraska, Oklahoma, and South Dakota. Read more in The T-Mobile–Sprint Merger Gets a Key Update.

The US Department of Justice approved the merger between the country’s third- and fourth-ranked wireless carriers in July. The combined entity would divest some assets, including Sprint’s prepaid business to Dish Network (DISH). After the deal’s closure, Dish would become the fourth-ranked wireless carrier in the country, replacing Sprint. Dish is expected to get around 9 million prepaid customers from the carrier.

However, the merger delay is also slowing Dish’s efforts to roll out its wireless operations. Verizon and AT&T (T) are currently the top two mobile operators. For more on this development, please read What the T-Mobile-Sprint Merger Delay Could Mean.

What’s next for Sprint and T-Mobile?

Even after the approval from the DOJ and support from the FCC, the deal is not certain. T-Mobile doesn’t want to go ahead with the merger until the multistate lawsuit can be settled.

The critics are trying to block the merger, as they believe it would unfairly benefit T-Mobile. They believe the merger would reduce the competition in the industry, ultimately increasing prices for consumers. However, T-Mobile has already clarified that it would not raise prices for three years.

The $26.5 billion merger has been pending since April 2018. It hit new uncertainty last month after the FCC alleged that Sprint had wrongfully claimed subsidies. The FCC alleged that the mobile operator had claimed millions of dollars in subsidies meant for low-income subscribers, even when they were not using the services. FCC Commissioner Geoffrey Starks asked to pause the proposed merger until the subsidy matter could be investigated.

T-Mobile and Sprint: Stock performances

In 2019, T-Mobile stock is up more than 22%, while Sprint has surged only 5%. Both stocks hit 52-week highs in July after the DOJ approved the merger. However, T-Mobile stock has primarily been range-bound since then, while Sprint has been notably weak.

The uncertainty regarding the merger has weighed on the stocks recently. Another beneficiary from the merger, Dish Network stock has risen 30% year-to-date. AT&T (T), the second-largest wireless carrier, is up more than 30% year-to-date.

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