T-Mobile and Sprint may have to create a new wireless carrier in U.S.

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T-Mobile CEO John Legere with the Phone BoothE.
Deal between T-Mobile and would be worth $26.5 billion.
Photo: T-Mobile

The Department of Justice are happy to let T-Mobile and Sprint’s merger complete — on one condition. In order for the $26.5 billion merger to proceed, the DOJ wants the companies to help with the creation of a new wireless carrier.

This would address the concern about a merger stifling competition by reducing the number of major U.S. carriers. But as Bloomberg points out, “spinning off a full-fledged national competitor would be a high bar for T-Mobile and Sprint to meet.”

Moving ahead with the merger

The proposed merger between the two giants was previously signed off by the Chairman of the Federal Communications Commission. However, this does not represent a final verdict. An FCC vote on the plan still has yet to be scheduled.

More significantly, the DOJ needs to agree to a merger. The head of the agency’s Antitrust Division recently stated that he hadn’t yet decided whether to approve the deal.

A package of concessions endorsed by the FCC did not persuade this DOJ division to approve the deal. T-Mobile CEO John Legere and Sprint Executive Chairman Marcelo Claure met with top antitrust officials last week.

The prospect of setting up a fourth wireless competitor may turn out to be the only way to proceed. If T-Mobile and Sprint are unable to persuade the Justice Department to approve the merger, the government can sue in court to block things proceeding.

What happens next remains to be seen. I’m no mergers and acquisitions expert. But getting two companies to create their own future competition seems a slightly unusual move, doesn’t it?

Source: Bloomberg