NEW YORK: T-Mobile US Inc and Sprint Corp are considering the divestiture of some airwaves to win Justice Department approval of their US$26.5 billion merger, a proposal that’s already attracted interest from Comcast Corp and Charter Communications Inc, people with knowledge of the matter said.
Justice officials met on Wednesday with Comcast and Charter over their possible interest in the airwaves and a potential role as a fourth wireless competitor, according to the people, who asked not to be identified because the talks are private. Both cable operators already offer wireless service.
T-Mobile and Sprint are scrambling to meet conditions sought by top Justice officials weighing whether to approve their merger, which would reduce the number of major wireless carriers to three from four.
Sprint shares rose as much as 4% to US$7.07 after Bloomberg reported that the companies were considering further concessions to win approval of the deal. T-Mobile was little changed at US$76.06.
The two wireless companies are considering divesting the airwaves to the government, which would sell them to help establish a fourth carrier, according to the people. Representatives from Comcast and Charter declined to comment. There was no immediate response from Sprint, T-Mobile or the Justice Department.
Comcast and Charter, the two largest US cable operators, told Justice Department officials they would bid on certain parts of the wireless business that might be divested as a condition of the deal, the people said. The cable companies are interested primarily in spectrum, as well as favourable wholesale agreements, network equipment and customers that might be part of the divestiture, according to the people.
Both cable companies use Verizon Communications Inc’s network to offer mobile phone service to their subscribers. Less than two years old, Comcast Xfinity Mobile has already signed on 1.4 million customers. The wireless service is designed to help lock in cable customers to service bundles, a way of boosting user loyalty.
But with fifth-generation wireless networks now under construction, the cable companies face a new threat from mobile carriers that will use the super speeds to serve homes with broadband and TV. While building a new network would be costly, Comcast and Charter could combine resources and use spectrum that T-Mobile and Sprint may have to sell as a condition of the deal.
The talks with the Justice Department are taking place after Federal Communications Commission Chairman Ajit Pai last week said he’ll recommend that his agency approve the merger on the condition that the companies sell Sprint’s Boost prepaid brand, build an advanced 5G network over three years, and pledge not to raise prices while the network is being constructed.
While the FCC and the Justice Department typically work closely together in reviewing mergers, they base their decisions on different standards. The FCC weighs whether a deal is in the public interest while the Justice Department focuses on how a tie-up could harm competition.
The Sprint acquisition would consolidate the U.S. wireless market to three national players, sparking fears that consumers will see higher bills, an outcome the companies say won’t happen. The Justice Department has long been against allowing consolidation in the industry. In 2014, it opposed an attempt by Sprint and T-Mobile to merge. And it sued to block AT&T’s bid in 2011 to take over T-Mobile, saying the U.S. mobile market needs a strong fourth rival.