WASHINGTON (CN) - Sprint agreed Friday to divest parts of its prepaid wireless business for federal approval of its $26.5 billion merger plans with T-Mobile.
The Justice Department announced the settlement this morning with five states, more than a year after the two telecom giants announced their plans to merge in April 2018.
As part of the deal, Sprint will divest Boost Mobile, Virgin Mobile and Sprint prepaid to satellite television company Dish Network. T-Mobile and Sprint will also give Dish access to 20,000 cell sites and to T-Mobile's network for seven years, during which time Dish will work on constructing its own 5G network.
"With this merger and accompanying divestiture, we are expanding output significantly by ensuring that large amounts of currently unused or underused spectrum are made available to American consumers in the form of high quality 5G networks," Assistant Attorney General Makan Delrahim said in a statement Friday. "Today's settlement will provide Dish with the assets and transnational services required to become a facilities-based mobile network operator that can provide a full range of mobile wireless services nationwide."
The Justice Department says the divestiture will bring a new competitor into the market and alleviate concerns about the merger's anti-competitive effects. Without the agreement, the Justice Department says the merger would harm competition by aligning two of the four major wireless companies that own their own networks rather than leasing from another company.
"The combination of T-Mobile and Sprint would eliminate head-to-head competition between the companies and threaten the benefits that consumers have realized from that competition in the form of lower prices and better service," the Justice Department said in a statement.
Representing one state that is not part of the deal, New York Attorney General Letitia James called it unclear Friday that Dish will be able, or is even willing, to be a viable competitor in the wireless market. James and 13 other state attorneys general brought a federal complaint in New York in June challenging the proposed merger.
James told reporters on a press call Friday that the agreement will not affect the core point of the New York litigation, though she said it is possible the plaintiffs will have to amend their complaint to include information about the consent decree.
"The promises made by Dish and T-Mobile in this deal are the kinds of promises only robust competition can guarantee," James said in a statement. "We have serious concerns that cobbling together this new fourth mobile player, with the government picking winners and losers, will not address the merger's harm to consumers, workers and innovation.”
T-Mobile and Sprint meanwhile praised the settlement, saying it helps bring their merger closer to completion.
"This is an important day for our country and, most important, American consumers and businesses," Sprint Executive Chairman Marcelo Claure said in a statement. "Today's clearance from the DOJ, along with our anticipated approval from the FCC, will allow the U.S. to fiercely compete for 5G leadership."
In addition to the Justice Department, the attorneys general of Nebraska, Kansas, Ohio, Oklahoma and South Dakota were involved in the settlement. Once the proposed agreement has been open to public comment for 60 days, the government will ask the court to enter final judgment in the case. Both the complaint and consent decree were filed in U.S. District Court for the District of Columbia.
Praising the settlement, Kansas Attorney General Derek Schmidt said the merger will help bring better service and more competition to his state, where the new company will keep a headquarters.
"Our team has studied this merger and its effect on Kansas," Schmidt said in a statement. "I am convinced it will benefit Kansas consumers by increasing competition in our state, expanding quality coverage in many rural areas of Kansas, expediting the deployment of 5G technology for Kansas, and protecting and expanding Kansas jobs."
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