PHOENIX — Attorney General Mark Brnovich applauded the U.S. Department of Justice (DOJ) today for its efforts in crafting a proposed settlement in the planned merger of T-Mobile US, Inc. (“T-Mobile”) and Sprint Corporation (“Sprint”) (collectively the “New T-Mobile”) that adopts several provisions sought by the Arizona Attorney General's Office ("AGO"). The proposed settlement protects the interests of Arizona consumers by mitigating potential anti-competitive components of the proposed merger and bringing enhanced broadband and wireless coverage to rural Arizona.
The Arizona Attorney General's Office was part of a working group of bipartisan Attorneys General and the DOJ that reviewed the proposed merger and settlement conditions necessary to resolve anti-competitive concerns related to the merger. Over the past few months, New T-Mobile and Dish Network Corporation ("Dish") negotiated with the DOJ, the Attorneys General, and the FCC. Commitments made to the FCC, along with the key terms of the Proposed Final Judgment (“PFJ”) announced today substantially reduces potential anti-competitive effects of the merger on Arizona consumers.
"As Arizona's chief law enforcement officer, I am committed to protecting Arizona consumers from mergers that would potentially reduce competition and result in higher prices and fewer choices for consumers," said Attorney General Mark Brnovich. "I want to commend the Department of Justice for commencing a working group that provided an opportunity for my office to express concerns on behalf of Arizona consumers and for crafting a proposed merger settlement that addresses consumer protection concerns raised by my office. The proposed plan requires the expansion of broadband and wireless coverage for rural areas of Arizona, and will provide commitments to help maintain access to networks by lower-cost operators."
On May 24, 2019, Attorney General Brnovich sent a letter to T-Mobile expressing concerns about the proposed merger’s impact on Arizonans, identifying three main concerns: (1) the impact on broadband access in rural Arizona, including tribal nations’ territory, (2) ensuring that lower-cost network options that are currently available to Arizonans remained available post-merger, and (3) to the extent possible, ensuring employment opportunities remained available post-merger in communities throughout the state.
Details of the Negotiated Settlement:
T-Mobile and Sprint agreed to the prompt divestiture to Dish of all intangible assets primarily used by Boost Mobile, Sprint-branded prepaid, and Virgin Mobile businesses, including retail locations, licenses, personnel, facilities, data, intellectual property, and all relationships or contracts with prepaid customers served by Sprint, Boost Mobile, and Virgin Mobile. Because Dish already holds significant spectrum assets, which is a scarce resource, the divestiture, the FCC commitments, and PFJ provide Dish the realistic ability to become a competitive and fourth facilities-based wireless carrier. The agreement also facilitates Dish’s ability to exercise its option to acquire the spectrum assets, cell sites, and retail assets to establish itself as a viable competitor in the retail mobile wireless services market.
T-Mobile and Sprint represented specific coverage expansions and commitments nationwide, which will benefit Arizonans and create higher speeds and better coverage in Arizona’s rural areas. Within three years of the merger, New T-Mobile agrees to reach 75% of the country with mid-band spectrum and 97% with low-band resulting in speeds of more than 100 megabytes per second for 66.6% of the country. Within six years of the merger, New T-Mobile agrees to deploy a 5G network reaching 88% of the population with mid-band coverage and 99% of the population with low-band coverage. Specifically for rural America, within six years, New T-Mobile agrees to deploy 5G coverage to 90% of the rural population with low-band coverage and 66.7% of the rural population with mid-band coverage.
Arizona’s coverage will mirror and possibly exceed these national commitments creating an expanded network for rural Arizonans.
In the current competitive framework, T-Mobile and Sprint negotiate agreements with Mobile Virtual Network Operators (“MVNOs”), an important, low-cost alternative to facilities-based carriers. Historically, Sprint has provided the most favorable terms to MVNOs. One of the most favorable terms that Sprint has offered its MVNOs is a “core control” provision allowing the MVNO more freedom in the services it offers consumers and the ability for potential innovation from the MVNO.
In T-Mobile’s Commitments to the FCC, and incorporated by reference in DOJ’s PFJ, T-Mobile committed that New T-Mobile’s additional network capacity will create an incentive to lower wholesale prices to MVNOs to ensure that the new network capacity is not wasted by sitting idle. T-Mobile also publicly represented that it will honor the terms of existing Sprint and T-Mobile’s MVNO agreements, including Sprint’s agreement with MVNO, Altice. T-Mobile committed to not exercise any termination rights under Altice’s MVNO agreement with Sprint that might be triggered by the merger.
Additionally, T-Mobile commits to engage in good faith negotiations to expand the existing Sprint/Altice agreement to the New T-Mobile’s network, directly addressing the concerns raised in Arizona’s May 24, 2019 letter.
To encourage Dish to lease to smaller MVNOs, Dish agreed to a restriction on leasing Dish’s capacity to T-Mobile, AT&T, and Verizon. This agreement is provided for in the lease-back section of the contract between Dish and T-Mobile/Sprint. Dish can lease no more than 35% of its capacity to T-Mobile, AT&T, and Verizon (“the Big Three”) to encourage Dish to instead lease its capacity to smaller MVNO’s.
This provision was added after Arizona questioned Dish’s plans for future contracts with MVNOs.
The AGO's concerns regarding the coverage of rural areas in Arizona, and maintaining competitive MVNO agreements in the future appear to be resolved by the PFJ. As a result of Arizona’s inquiry, New T-Mobile and Dish have both committed to comprehensive coverage to rural areas nationwide by certain timeframes with a large penalty if those commitments are not met. Furthermore, New T-Mobile has agreed to keep its current MVNO contract, Altice’s core control contract, enabling other MVNOs to potentially negotiate a similar term because New T-Mobile has committed to continuing “good faith negotiations” in its FCC commitments.