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California to drop fight against T-Mobile's merger with Sprint

The $26.5 billion merger between the third and fourth largest US wireless companies will finally close.

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California Attorney General Xavier Becerra is expected to announce Wednesday that he will not appeal a court decision that allows T-Mobile to merge with Sprint. 

Justin Sullivan/Getty Images

California won't appeal a US District Court decision allowing the $26.5 billion merger between T-Mobile and Sprint, state Attorney General Xavier Becerra said Wednesday after reaching a settlement with T-Mobile.

The state of California, which was leading the fight to stop the merger, was the last big holdout in getting the merger finalized. 

Last month, a US district judge in New York ruled in favor of the deal, which will combine the third- and fourth-largest US wireless carriers. Fourteen state attorneys general, led by New York and California, had opposed the transaction, arguing that combining the companies would dramatically reduce competition and push up prices. 

T-Mobile and Sprint argued that combining the companies would allow them to better compete with rivals AT&T and Verizon and pave the way toward faster deployment of 5G service throughout the US. 

Days after the judge's ruling in February, New York Attorney General Letitia James, who spearheaded the case against the merger alongside Becerra, announced that she would not appeal the decision

Becerra's decision to give up the fight likely means that T-Mobile will be able to close the deal as it has promised by April 1. The California Public Utility Commission also must approve the deal, but a California AG settlement with the companies makes it more likely that the California PUC won't oppose the deal. 

The merger between T-Mobile and Sprint, which was announced in 2018, has dragged on for nearly two years. It won approval last year from the Federal Communications Commission and the Department of Justice. But shortly after the announcement of DOJ approval, the attorneys general filed suit to block the transaction. As part of its approval from the DOJ, T-Mobile agreed to a deal to sell assets to Dish to make it the new fourth wireless carrier. The states' court case went to trial in December and concluded in January. 

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The states argued that reducing the number of national competitors from four to three would lead to increased prices and to worse service for consumers. They argued that Dish, a satellite TV service, isn't a sufficient replacement as a national carrier since it has no experience running a nationwide wireless service. 

In an effort to appease regulators, T-Mobile agreed to numerous promises and initiatives if it were allowed to merge with Sprint. It promised to create jobs as well as not raise prices on service following the merger.  

The company has also made further commitments to individual states such as Colorado, Texas and Nevada, which had all opposed the deal but pulled out of the litigation after they brokered their own deals with the company. 

At a press conference announcing the settlement, Becerra said the opposition to the merger by the state attorneys general sent a strong message to T-Mobile and other companies in the telecom sector around the world looking to merge. 

"Local markets matter," he said. "You may be global, but the local markets that you impact matter in assessing the competitive impact of your merger."

Under the terms of the settlement with California, T-Moblie agreed to conditions that will help protect low-income consumers as well as job protections for local Sprint workers, Becerra said. The framework for the deal with California involved commitments that T-Mobile publicly made in November. These commitments were not part of the deals the company struck with the FCC or DOJ. 

The commitments involve T-Mobile promising to help eliminate the "homework gap" by offering up $10 billion to deliver free internet access over the next five years and $700 million to provide hardware to 10 million low-income households. The company also said it would offer two new low-cost prepaid plans for the next five years. 

In addition, T-Mobile agreed to ensure the number of T-Mobile employees in the state of California would remain equal to or greater than the total number of current Sprint and T-Mobile customers for the next three years. T-Mobile will also open a new call center in the central valley of California, creating an anticipated 1,000 jobs. 

Becerra also said that T-Mobile will reimburse California and the other states involved in the settlement for the cost of its investigation into the merger and the litigation. This cost will total about $15 million, he said. 

"It is important for Californians to know that in their state, the markets for its business for any consumer business will be fair," he said. "Whether we have to go to court or not, or whether we're able to reach a settlement with companies ... we will do everything we can to make sure fairness, competition and good prices prevail."