T-Mobile and Sprint may have to set up a new carrier to get merger approved

What you need to know

  • U.S. DOJ officials want T-Mobile and Sprint to create a new national carrier to get their $26.5 billion merger approved.
  • The new network cannot be an MVNO — it has to be a full-fledged network with its own infrastructure.
  • Essentially, the DOJ wants four national carriers even after the merger goes through.

The FCC signed off on the T-Mobile/Sprint merger earlier this month, but the Justice Department isn't on board. And according to a new report in Bloomberg, the Justice Department is asking T-Mobile and Sprint to create a new national carrier in order to get the $26.5 billion merger approved.

The DOJ wants the two carriers to set up a full-fledged network with its own infrastructure, and not just another MVNO. Apparently, the DOJ is worried that consolidation in this space will hinder competition, and is keen on maintaining the current status quo of four national networks even after the merger goes through. From Bloomberg:

Top Justice Department officials want T-Mobile US Inc. and Sprint Corp. to lay the groundwork for a new wireless carrier -- with its own network -- as a condition to clearing their $26.5 billion merger, according to a person familiar with matter.

From the start, the biggest concern surrounding the T-Mobile/Sprint merger was it would reduce the number of national carriers from four to three, hindering competition. But the companies have argued that their deal would create a stronger No. 3 to market leaders Verizon Communications Inc. and AT&T Inc. So far, Justice Department antitrust chief Makan Delrahim hasn't yet been persuaded by that position and still wants four carriers, according to one of the people.

It's unlikely if T-Mobile or Sprint will agree to set up another network, as that would mean relinquishing spectrum and investing resources into what would essentially be a competitor.