Sprint - T-Mobile Merger: After California Drops Opposition, Deal Still Waiting To Close

California Attorney General Xavier Becerra announced Wednesday a multistate coalition would drop its challenge to the $26 billion Sprint-T-Mobile merger following an agreement that protects low-income subscribers and jobs, and expands service to underserved communities.

The merger, which would create the third largest U.S. cellphone carrier behind Verizon and AT&T, earlier had received Justice Department, regulator and federal court approval.

The deal, which was first announced in April 2018, could close as early as next month. The combined company will have more than 126 million subscribers, putting it on more equal footing with its two bigger rivals.

Becerra said the coalition, which involved a dozen states, had reached a settlement with T-Mobile that would protect employees of both companies and cover the costs of its investigation and litigation challenging the merger, as well as protecting low-income subscribers and service expansion to underserved communities.

“Most importantly, today's settlement locks in new jobs and protections for vulnerable consumers, and it extends access to telecom services for our most underserved and rural communities,” Becerra said in a press release.

Sprint (S) was trading 3.6% higher Wednesday; T-Mobile (TMUS) was trading up 2.7%.

The settlement:

• Makes low-cost plans available for five years that include 2 gigabytes of highspeed data for $15 a month or 5 GB for $25 a month;
• Extends for at least two years rate plans offered by T-Mobile under an earlier Federal Communications Commission commitment
• Provides 100 GB of no-cost broadband internet service per year for five years and a free mobile Wi-Fi hotspot device for 10 million qualifying low-income households that do not currently have service as well as the option to buy certain tablets at company cost;
• Protects jobs by offering all California T-Mobile and Sprint retail employees in good standing similar employment and guarantees staffing levels will not dip below current numbers for three years;
• Creates 1,000 new jobs in California at a customer service center in Kingsburg;
• Increases diversity in employment to 60% within three years, and
• Reimburses the coalition for the costs of its investigation and litigation.

To win regulatory approval, the companies agreed to sell certain wireless assets to Dish Network (DISH), along with Sprint’s prepaid business and some spectrum licenses. SoftBank owns more than 80% of Sprint and will trade 11 of its shares for each T-Mobile share, up from 9.75, shares while other shareholders are covered under the original deal.