‘Mixed emotions’ in Kansas City as Sprint merger with T-Mobile wins judge’s approval
A federal judge in New York has removed one of the remaining major obstacles to T-Mobile’s $26.5 billion takeover of Overland Park-based Sprint, as he rejected claims by a group of states that the deal would mean less competition and higher phone bills.
Though the deal still needs a few more approvals, T-Mobile expects to close on the acquisition as early as April 1.
“Today was a huge victory for this merger … and now we are FINALLY able to focus on the last steps to get this merger done!” T-Mobile CEO John Legere said in a news release Tuesday morning.
The news puts the Sprint brand — and its striking yellow and black logo — ever closer to obsolescence. Sprint’s employees, products and customers will eventually transition to the T-Mobile brand.
“Today’s announcement brings mixed emotions for many in KC,” said Tim Cowden, president and CEO of the Kansas City Area Development Council. “Sprint created billions of dollars of wealth and supported countless individuals and families in the KC region for more than a century. We are proud that KC will always be associated with Sprint’s lasting legacy of innovation.”
But he said Kansas City is prepared to partner with the new T-Mobile: “We are excited that T-Mobile recognizes the rich telecom talent base in KC and how critically important our region will be to the new company’s success in 5G and many innovations to come.”
Once the merger is complete, the number of major U.S. wireless companies will shrink from four to three. Even so, backers of the union, including government officials, say the move will increase competition. T-Mobile says the combined company will become a fiercer competitor to industry leaders Verizon and AT&T. In particular, it has pledged to complete a nationwide roll out of ultra-fast 5G service post merger. It also promised not to raise prices for three years.
The merger raises serious questions about the fate of some 6,000 Sprint workers and 1,500 company contractors stationed at the company’s Overland Park headquarters. The company employs about 30,000 nationally.
Mergers and acquisitions are notorious for leading to job losses as companies consolidate job functions and realize profit-boosting efficiencies. But T-Mobile has pledged that its merger will actually create new jobs. Currently based in the Seattle area, it has pledged to keep a second corporate headquarters here, though it’s unclear how many it will employ locally.
“It’s a good day for Kansas City,” said Joe Reardon, president and CEO of the Greater Kansas City Chamber of Commerce.
He said both Sprint and T-Mobile have shown a deep commitment to Kansas City — which he doesn’t expect to waver after the merger. Reardon said combining forces with T-Mobile is Sprint’s best shot at remaining competitive and the merger may actually boost the metro’s economy and increase local employment.
“It’s been a long time since we’ve had a Sprint that’s been poised to grow and perhaps grow at a rapid pace,” he said.
Sprint’s Chief Human Resources Officer Deeanne King said T-Mobile leadership has remained supportive of Sprint’s employees here and the city as a whole.
“From the start of this process, leaders from both companies have been clear that the New T-Mobile will maintain a second headquarters in Overland Park. Since then, the news has only gotten better,” King said in a statement, noting the company’s plans to add a new 1,000-employee customer experience center in Overland Park.
With the judge’s order in hand, she said the company was focused on “quickly completing the few remaining necessary steps” to close the transaction.
A group of 14 state attorneys general tried to block the deal, arguing that having one fewer phone company would cost Americans billions of dollars in higher bills. Consumer Reports said the three remaining carriers would have fewer incentives to compete on prices and quality.
Judge Victor Marrero ruled Tuesday that most antitrust litigation ends in “competing crystal balls“ that “shed little light on a clear path to resolving the dispute.” Ultimately, Marrero said he wasn’t convinced the deal would lead to higher prices or lower quality for the industry, as the states insist.
He agreed with arguments from the states that said both Sprint and T-Mobile will provide 5G service without the combination, but said they didn’t acknowledge that the standalone companies’ 5G networks would be more limited in their scope and take longer to build out.
New York Attorney General Letitia James, one of the leading attorneys general in the case, said her office was considering an appeal. She said Tuesday’s ruling “marks a loss for every American who relies on their cell phone for work, to care for a family member, and to communicate with friends.”
Gigi Sohn, a fellow at the Georgetown Law Institute for Technology Law & Policy, said that while consumers are often promised benefits from mergers, “what they are left with each time are corporate behemoths who can raise prices at will, use their gatekeeper power to destroy competition and new voices and hijack regulatory and legislative processes.”
The judge’s decision comes after antitrust regulators with the U.S. Justice Department sanctioned the deal in July. Likewise, the Federal Communications Commission signed off on the merger in November.
As part of its settlement with the Justice Department, T-Mobile agreed to help create a new, but smaller wireless competitor in satellite television company Dish.
Another judge still needs to approve that settlement, a process that is usually straightforward but has taken longer than expected. A utility board in California also has to approve the deal.
Kansas Attorney General Derek Schmidt on Tuesday said the judge’s decision was “welcome news for Kansas.” His office lobbied for the merger and did not join the states that sued to block it. In a statement, he said the merger would benefit the state by increasing competition, expanding coverage in rural areas and “protecting and expanding Kansas jobs.”
“We intend to hold the merged company to its promises of investment in its Kansas network and of maintaining substantial employment at what will become the combined company’s ‘second headquarters’ in Overland Park.”
When asked about what commitments the company had made to the state, a spokesperson in his office pointed to agreements T-Mobile made with federal regulators and its public statements about adding jobs in Overland Park. The spokesperson also pointed to public comments T-Mobile has made surrounding the workforce in Kansas, but would not answer questions about how the state attorney general would hold it accountable if it failed to meet them.
To win approval, T-Mobile agreed to sell millions of Sprint’s prepaid customers to Dish, a satellite TV company with a shrinking customer base. T-Mobile also has to rent its network to Dish while the fledgling rival builds its own. Dish is also required to build a 5G network over the next several years.
Dish has spent about $21 billion over a decade buying wireless spectrum, the airwaves for transmitting data and calls, although Dish hasn’t done much with it. Analysts have long been skeptical of whether Dish intends to build its own network or sell the spectrum to others. Now Dish faces up to $2.2 billion in fines if it fails to create a 5G network that serves 70% of the country by 2023.
Some analysts have said that Dish has potential as a viable competitor, but a big question is when. Even if it meets the 2023 government-imposed deadline, it still won’t reach as many potential customers as Sprint’s current-generation 4G network does today.
DISH co-founder Charlie Ergen said in a statement Tuesday that the ruling will accelerate its ability to deploy 5G and that its growth as a new competitor will bring “lower prices, greater choice and more innovation to consumers.”
Critics argued that Dish wasn’t certain to succeed as a wireless company and was far smaller than Sprint.
The Rural Wireless Association, which represents wireless carriers with fewer than 100,000 subscribers each, questioned the satellite provider’s ability to build a viable competitor. In a statement Tuesday, the organization said the inclusion of Dish in the deal was an “unartful attempt” to remedy the competitive harms of the merger.
“With only some concessions by T-Mobile and Sprint to sell off parts of their business to Dish, the consolidation will result in the U.S. having only three viable national wireless carriers, which in the long game will result in price increases for all consumers in the U.S.,” the association’s statement said.
In his ruling, the judge said he didn’t think Sprint would be a “strong competitor“ as a standalone company. And he disagreed that Dish wouldn’t be a viable competitor or live up to its commitments to build a national wireless network.
In a letter last spring, Sprint CEO Michel Combes repeated T-Mobile’s pledge that the merger would be “jobs positive.” By 2024, T-Mobile expects to create 11,000 new jobs, including 1,000 jobs at a new customer experience center in Overland Park.
That pledge has been met with skepticism, though.
“I think there’s no realistic expectation that Sprint will maintain a major presence in Kansas City once the Sprint/T-Mobile deal closes,” Jeff Moore, principal with wireless industry research firm Wave7 Research, told The Star in July.
The Communication Workers of America has opposed the merger, arguing it puts some 30,000 jobs at risk. The labor union points to T-Mobile’s own projections that the combination could result in some $6 billion in cost synergies.
“Throughout this process, regulators who are supposed to be protecting the public interest have ignored clear evidence that this merger would result in significant job loss for wireless workers,” CWA President Chris Shelton said in a news release Tuesday.
With uncertainty about Sprint’s prospects as a standalone company, the merger was viewed by many local leaders as the best possible outcome for Kansas City, whose economy has for years been closely linked with the fate of the wireless carrier.
“We’re excited about this to finally be coming to an end,” said KC Tech Council President & CEO Ryan Weber. “I think this is the best news for the region.”
Weber remains encouraged by T-Mobile’s pledge to keep workers in Kansas City. He said many of Sprint’s local employees tout high-demand skills and experience.
“We know there’s a concentrated number of high-skilled workers and keeping that workforce intact is very important to any company, especially tech companies that are in dire need for those workers,” Weber said.
In the months-long lead up to Tuesday’s decision, Sprint leaders say they have labored to retain Overland Park employees. Among other measures, the company implemented a guaranteed minimum bonus program, revived an annual incentive trip to Hawaii and added new perks like an additional holiday.
Sprint and T-Mobile first considered a union in 2014, but that deal fell apart amid objections from federal regulators. The latest merger talks date back to at least 2017. In April 2018, CEOs from the two companies announced they had reached an agreement on the deal.
T-Mobile leaders saw President Donald Trump’s election and his appointed regulators as a good opportunity to try again to combine, according to evidence during the trial.
In Tuesday’s news release, Marcelo Claure, Sprint’s executive chairman, said the merger would help the new company roll out nationwide 5G service and lower costs.
“With the support of federal regulators and now this Court, we will focus on quickly completing the few remaining necessary steps to close this transaction,” he said. “I am proud of my Sprint team’s dedication, passion and resilience throughout the merger review process, and we are ready to make the vision of a New T-Mobile a reality.”
This story was originally published February 11, 2020 at 9:32 AM.
