FCC chairman Ajit Pai said he will be recommending that the merger of T-Mobile US and Sprint go through, after the companies provided “significant” concessions. Pai believes the deal will speed up the deployment of 5G throughout the US, and bring faster mobile broadband to people living in rural areas. “Two of the FCC’s top priorities are closing the digital divide in rural America and advancing US leadership in 5G (…). The commitments made today by T-Mobile and Sprint would substantially advance each of these critical objectives,” the chairman said.
The FCC started evaluating the T-Mobile/Sprint transaction in June 2018 and has come to a preliminary conclusion on the deal for the full commission to vote. The deadline for completing the merger was pushed back a few times, as the regulator sought additional information from the companies and various parties gave their opinion of the deal. The Department of Justice must also clear the merger, and recent reports suggested that concessions would be needed in order to gain approval.
Deployment commitments
To obtain the approval necessary for the deal to pass, the company said it will deploy a 5G network that will cover 97 percent of the US population, within three years of the merger close, with 99 percent coverage achieved within six years. The network will cover 85 percent of people in rural areas within three years and 90 percent within six. In addition, 90 percent of people in the country will get access to mobile broadband speeds of at least 100 Mbps, with speeds of 50 Mbps guaranteed for 99 percent. The companies have also promised that their network will cover at least two-thirds of the country’s rural population with mid-band spectrum for 5G.
Boost Mobile divestment
The companies also said they will deploy an in-home broadband product, including to rural households, giving US households another option for home broadband service, Pai said. In addition, the companies promise not to raise prices for three years, including for 5G services, and to sell Sprint's prepaid brand Boost Mobile.T-Mobile said the sale may happen after the merger is completed, and the buyer will also have access to good wholesale terms from the company, suggesting it is likely to be MVNO. The company will continue to compete in the prepaid market with its brands Metro and Virgin Mobile, while also committing to uphold wholesale terms in its MVNO deal with Altice USA.
Milestone payments
The chairman noted that if the companies do not deliver on their promises, they will face harsh consequences, including payments to the US Treasury of “billions of dollars.” T-Mobile's CEO John Legere said in a statement that "When we say we'll do something, we mean it!".
The agreement will be subject to three- and six-year milestones, as well as annual reports and extensive network drive tests to ensure the company is meeting the commitments. T-Mobile must certify to the FCC that its network data is accurate; no independent auditor will be appointed.
According to the FCC notice, the "voluntary" payments will be based on the extent to which T-Mobile misses coverage targets, ranging from USD 10 million for a less than 5 percent difference with the target to USD 250 million for over 50 percent for the three-year targets. Similar rates apply for the six-year targets, with a maximum total payment of USD 2.4 billion. If the payments are not made, the FCC may take legal action against the company for failure to meet its obligations.
