Updated at 12:45 p.m. ET
The Department of Justice on Friday gave its approval for T-Mobile and Sprint to merge, in what has been a protracted fight for the companies to finalize their $26 billion deal. The merger still faces a review by a federal district court, and consumer advocates worry the industry consolidation will lead to higher rates.
The resulting company, which would be known as T-Mobile, would be the third-largest U.S. wireless carrier, with about 90 million customers. In pushing for the deal, executives of the companies said the combined entity would invest more heavily to bring superfast Internet connectivity, or 5G, to market quicker.
Assistant Attorney General Makan Delrahim, of the Justice Department's antitrust division, said the combination of Sprint and T-Mobile "creates real pro-competitive efficiencies" by accelerating the rollout of 5G. That will especially help people in rural areas who have limited access to high-speed Internet, he said.
In order to clear the final federal regulatory hurdle, the companies had to agree to sell off some assets to Dish Network, including wireless spectrum and Sprint's prepaid phone business, Boost Mobile. That would effectively make Dish the country's fourth-largest wireless carrier, although it would continue to rely on T-Mobile for use of its network.
And the new company must "make available to Dish at least 20,000 cell sites and hundreds of retail locations," the Justice Department said. It must also provide Dish access to the T-Mobile network for seven years while Dish builds its own 5G network.
Those concessions did not appease consumer advocates, who have said such a deal would raise wireless bills and make the industry less competitive.
"The concessions are not enough to make sure there's a strong, viable, fourth national competitor," said Gigi Sohn, a fellow at the Georgetown Institute for Technology Law and Policy.
Both companies are foreign-controlled. Japan's SoftBank controls Sprint, and Germany's Deutsche Telekom controls T-Mobile.
In recent years, Sprint and T-Mobile yo-yoed around each other, trading off as the third- and fourth-largest telecom carriers.
Their merger would create a much larger third competitor to long-dominant Verizon and AT&T.
Together, Sprint and T-Mobile would become the second-largest telecom company by the number of phone customers, according to analyst Roger Entner at Recon Analytics. The combined company would be the third-largest by the measure of all wireless connections, including tablets and smart devices, Entner said.
Both T-Mobile and Sprint historically embraced more consumer-friendly policies, heavily promoting family plans, eliminating two-year contracts and allowing consumers to use the same device when switching networks. "T-Mobile was really the maverick in this space," Sohn says, but now it will be under pressure to compete with its higher-priced competitors.
T-Mobile and Sprint say they need to merge in order to stay competitive and have promised their combination would mean additional investments in rural wireless networks.
The companies first proposed a merger five years ago. The Federal Communications Commission tentatively endorsed the deal in May.
But the deal still faces another potential roadblock: Attorneys general of 13 states and the District of Columbia have sued to stop the deal, arguing it will increase consumer wireless costs by at least $4.5 billion a year.
NPR's Alina Selyukh and Ryan Lucas contributed to this report.
ARI SHAPIRO, HOST:
The Justice Department has given its blessing to a deal that would transform America's wireless industry. Sprint and T-Mobile are now a step closer to merging. It would create the nation's third-largest wireless phone carrier, behind Verizon and AT&T. As NPR's Yuki Noguchi reports.
YUKI NOGUCHI, BYLINE: The two carriers first proposed a merger five years ago. That fell through because of concerns that less competition would raise prices for consumers. Then last year, the companies came back with their current $26 billion plan to merge. Erik Gordon is a business professor at the University of Michigan's Ross School of Business.
ERIK GORDON: This deal is one of the longest deals in gestation, ever.
NOGUCHI: The companies argued that by combining they could invest more heavily in superfast, 5G wireless networks.
GORDON: Neither company wanted to foot the bill alone. So they had every incentive to get together.
NOGUCHI: Gordon says the Justice Department bought that argument. Makan Delrahim is assistant attorney general.
MAKAN DELRAHIM: The combination of T-Mobile and Sprint creates real procompetitive efficiencies by accelerating the 5G broadband build-out in the United States and, importantly, to many people in the rural parts of the country.
NOGUCHI: As part of its bargain with regulators, Sprint will have to sell its Boost Mobile prepaid phone business and some of its valuable airwaves to Dish Network. That means Dish, a satellite TV company with no experience in the phone business, would resell T-Mobile's service, becoming the fourth-largest national wireless provider. These concessions did not appease consumer advocates. Gigi Sohn is a fellow at the Georgetown Institute for Technology Law & Policy. She says the merging companies had been the industry's fiercest competitors, and their rivalry served consumers well.
GIGI SOHN: T-Mobile really was the maverick company in this space. Both T-Mobile and Sprint. They were the ones who got rid of two-year contracts. They were the ones who let you take your device to different networks. You know, they were the ones who had family plans.
NOGUCHI: George Slover, senior policy counsel for Consumer Reports, says he thinks the effect is that consumers will end up paying more.
GEORGE SLOVER: It's going to be less quality, higher prices, fewer choices, all of the harms that we've been talking about since the merger was proposed.
NOGUCHI: The deal has one tentative approval from the Federal Communications Commission, which will vote on the proposal. But the deal has not yet cleared all legal hurdles. A group of state attorneys general led by California and New York has filed suit trying to block the deal. They claim the combination would raise wireless prices on consumers by more than $4.5 billion a year. That trial is currently scheduled to take place in October, but the states have requested a delay.
Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.