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June 24, 2019updated 25 Jun 2019 9:37am

T-Mobile, Sprint close to clinching merger deal but hurdles remain

By MarketLine

The US-China trade war and the Trump administration ban on Chinese telecom company and phone maker Huawei may help unlock the merger between T-Mobile and Sprint in the US.

Will telecoms merger go ahead?

After long negotiations to reach a deal stretching back to 2014, the $26 billion merger of T-Mobile and Sprint, the third and fourth largest telecoms in the US respectively, looks likely to happen in the near future.

Being the third part of the US telecom triopoly will allow the resulting telecom to be competitive and accelerate their plans to enter the 5G race. The 5G roll-out could be the key to unlocking the merger since the Huawei ban has slowed plans to spread the high-speed technology across the country.

As part of their strategy to gain approval for the deal, both companies have committed to rolling out 5G in rural areas in the next 3 years. With the speeding up of 5G becoming a priority for the Trump administration, allowing the deal to proceed makes sense.

Disruption of the US telecom market

Should the deal go ahead, this third newly-formed company would disrupt the current state of the US telecoms market.

The new entity is expected to account for an approximate 29% of the market share, which is roughly 5% less than each of their competitors (At&T and Verizon). Consequently, the US telecom market would become a triopoly, affecting competition and causing a significant increase in prices.

Both companies determined to overcome challenges

The possibility of a triumvirate dominating the telecommunications market has not been well received by some government official and 10 lawsuits have been filed by Democrat attorney generals to block the merger.
The Republican-dominated Federal Communications Commission is in favour of the merger, but Department of Justice (DoJ) officials have demanded that both of the companies sell assets to leave room for a fourth operator.

A spectrum sale is currently in talks that would involve Sprint selling Boost Mobile to Dish Network, as well as agreeing not to overcharge Dish for the use of the newly-merged network after the sale is completed.
These efforts, made by both companies to fulfil DoJ demands, are likely to pave the way for approval to merge.

However, the legal turmoil affecting Germany’s Deutsche Telekom (a majority shareholder of T-Mobile), leaves the deal hanging by a thread.