DOJ Settlement Allows T-Mobile / Sprint Merger, Requires Significant Asset Divestiture To DISH Network

July 26, 2019 – The U.S. Department of Justice, along with the states of Kansas, Nebraska, Ohio, Oklahoma, and South Dakota have reached a settlement with T-Mobile and Sprint which allows the two smallest nationwide mobile wireless providers to complete their proposed merger.[1]

However, to help facilitate the settlement, Dish Network Corp. was added as a defendant to the action and (Proposed) Final Judgment. T-Mobile and Sprint must divest spectrum, prepaid wireless businesses, cell sites, and physical assets to Dish. While the merger of T-Mobile and Sprint will contract the mobile wireless industry from four to three nationwide carriers, the terms of the DOJ’s settlement will prop up Dish as a new fourth nationwide mobile wireless carrier. Well, at least on paper this is what happens.

Under the terms of the (Proposed) Final Judgment, Dish will purchase Sprint prepaid wireless businesses Boost Mobile, Sprint-branded prepaid, and Virgin Mobile, and will enter into a full MVNO agreement with the merged entity (new T-Mobile) for at least seven years. The prepaid services will continue to be provided over new T-Mobile’s network. It’s assumed that the prepaid services will ultimately migrate to Dish’s facilities-based network when its built. The prices to be paid by Dish for the assets were not disclosed. If approved, the proposed Final Judgment will resolve the United States’ antitrust lawsuit, which sought to enjoin the merger of Sprint and T-Mobile. A copy of the Stipulation And Order is available here. A copy of the (Proposed) Final Judgment is available here.

Here is a quick summary of what is happening.

Mandatory Sale Of Assets To Dish – Prepaid Businesses & 800 MHz Spectrum

T-Mobile and Sprint will sell the following “Prepaid Assets” to Dish: all tangible and intangible assets primarily used by the Boost Mobile, Sprint-branded prepaid, and Virgin Mobile businesses, including but not limited to Boost and Virgin Mobile retail locations, licenses, personnel, facilities, data, and intellectual property, as well as all relationships and contracts with prepaid customers served by Sprint, Boost Mobile, and Virgin Mobile.[2] Dish and New T-Mobile will enter into transition services agreements to provide billing, customer care, SIM card procurement, device provisioning, and all other services used by the prepaid businesses. This will go on for 2-3 years, or until Dish can do all of these things on its own. New T-Mobile will eventually assign or transfer to Dish, all assignable agreements related to the prepaid wireless businesses, such as supply contracts, licenses, and other service agreements.

T-Mobile and Sprint will sell the following “Spectrum Assets” to Dish: all of Sprint’s 800 MHz spectrum holdings as listed and described in Attachment A to the proposed Final Judgment. If Dish later decides it does not want to purchase the 800 MHz spectrum, it will owe a $360 million penalty.[3] If this happens, T-Mobile and Sprint must publicly auction the licenses, subject to a number of conditions. Dish must use the spectrum and the other spectrum it currently owns to deploy a facilities-based mobile wireless network and offer postpaid retail service.

At the expiration of the Final Judgment, Dish must have deployed all of the 800 MHz licenses “for use in the provision of retail mobile wireless services.” Any licenses acquired but not being used must be forfeited by Dish at that time, “unless [Dish] already is providing nationwide retail mobile wireless services over Dish’s facilities-based network.”[4]

Unless extended, the Final Judgment will expire seven years from the date of its entry. It may be terminated after five years from the date of entry by the U.S. if the divestitures, buildouts and other requirements have been completed and the continuation of the Final Judgment is no longer necessary or in the public interest.

Decommissioned Cell Sites

Within five years of closing the sale of the Prepaid Assets to Dish, T-Mobile and Sprint must offer not fewer than 20,000 decommissioned cell sites to Dish. [5] T-Mobile/Sprint also must make any decommissioned transport-related equipment (including microwave backhaul gear and network switches) on decommissioned cell sites available for purchase by Dish. A decommissioned cell site is one that is no longer transmitting on the merged entity’s network.

Decommissioned Retail Locations

Within five years of closing the sale of the Prepaid Assets to Dish, T-Mobile and Sprint must offer not fewer than 400 retail locations to Dish.[6]

New T-Mobile’s Lease & Deployment Of Dish Network’s 600 MHz Spectrum

The Final Judgment requires New T-Mobile and Dish “to negotiate in good faith to reach an agreement for [New T-Mobile] to lease some or all of [Dish’s] 600 MHz Spectrum Licenses for deployment to retail consumers by [New T-Mobile].”[7] The leases must be for a sufficient period of time for new T-Mobile to make adequate commercial use of the 600 MHz licenses.

Full Mobile Virtual Network Operator Agreement

The Final Judgment requires New T-Mobile and Dish to enter into a Full MVNO Agreement for a term of no fewer than seven years.[8] The MVNO Agreement is subject to a number of terms and conditions.

Existing Mobile Virtual Network Operator Agreements

T-Mobile and Sprint must abide by all terms of their existing MVNO agreements, and must agree to extend existing MVNO agreements on their existing terms until the expiration of the Final Judgment unless they are able to demonstrate that doing so will harm their ongoing business.[9]

Dish Network Actions To Achieve The Competitive Objectives Of The Proposed Final Judgment.

While the merger of T-Mobile and Sprint will contract the mobile wireless industry from four to three nationwide carriers, the terms of the DOJ’s settlement will prop up Dish as a new fourth nationwide mobile wireless carrier. In other words, Dish holds the key to the T-Mobile / Sprint merger. The mobile wireless industry is not healthy and competitive unless there are at least four nationwide providers. That’s why the DOJ’s settlement requires T-Mobile and Sprint to divest assets to Dish, and is contingent on Dish taking steps to become a competitive nationwide provider. Here is how the DOJ describes it:

Central to the relief offered by the proposed Final Judgment is the requirement that DISH undertake certain actions to effectuate the complete transfer of the Divestiture Assets to achieve the competitive objectives of the proposed Final Judgment.  Among other actions, DISH must: (i)  offer nationwide postpaid retail mobile wireless service to American consumers within one (1) year of the closing of the sale of the Prepaid Assets; (ii) comply with network build commitments; (iii) submit to the Department of Justice regular periodic updates on the status of its network deployment; and (iv) implement strict firewall procedures to prevent the exchange of competitively sensitive information through the ongoing relationships between DISH and T Mobile or Sprint necessitated by the divestitures.[10]

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[1] United States of America v. Deutsche Telekom AG, T-Mobile US, Inc., Softbank Group Corp., Sprint Corporation, And Dish Network Corporation, Case 1:19-cv-02232, Stipulation And Order, U.S. District Court For The District Of Columbia (July 26, 2019); United States of America v. Deutsche Telekom AG, T-Mobile US, Inc., Softbank Group Corp., Sprint Corporation, And Dish Network Corporation, Case 1:19-cv-02232, [Proposed] Final Judgment, U.S. District Court For The District Of Columbia (July 26, 2019).

[2] Proposed Final Judgment, Section II, L, p. 4. Prepaid Assets do not include the Assurance Wireless business and the prepaid wireless customers of Shenandoah Telecommunications Company and Swiftel Communications, Inc.

[3] Proposed Final Judgment, Section IV, B, 2, p. 12.

[4] Proposed Final Judgment, Section IV, B, 3, p. 12.

[5] Proposed Final Judgment, Section IV, C, 1, p. 13.

[6] Proposed Final Judgment, Section IV, D, 1, p. 16.

[7] Proposed Final Judgment, Section V, A, p. 18.

[8] Proposed Final Judgment, Section VI, A, p. 19.

[9] Proposed Final Judgment, Section VII, A, p. 20.

[10] Stipulation And Order at p. 4-5.