Dish 'Remedies' Contributed 'Substantially' to Approving T-Mobile/Sprint, Says Judge

State plaintiffs’ arguments T-Mobile would “pursue anticompetitive behavior” after buying Sprint weren't “sufficiently compelling" to block the transaction, wrote U.S. District Judge Victor Marrero for the Southern District of New York. Monday's 173-page decision (in Pacer) was released Tuesday (see 2002100061). He attached no new conditions.

The California Public Utilities Commission (CPUC) hasn't decided whether to greenlight T-Mobile/Sprint. It's still getting more information on the Dish Network component of the transaction (see 2002050006). Tunney Act review also remains pending at the U.S. District Court for the District of Columbia (see 2002040018).

Marrero rejected states’ contentions that Sprint, “absent the merger, would continue operating as a strong competitor.” He also didn’t buy that Dish won’t enter wireless as a “viable” competitor or build a formidable national network, he said. Marrero ruled just shy of four weeks after both sides concluded the bench trial with four hours of closing argument (see 2001150077). Stocks in all three companies involved in the deal closed higher Tuesday.

The deal is “not reasonably likely to substantially lessen competition,” said Marrero. The “strength” of the states’ arguments “might well suffice to warrant injunctions of mergers in more traditional markets,” he said. But evidence at trial persuaded Marrero that a “presumption of anticompetitive effects would be misleading in this particularly dynamic and rapidly changing industry,” he said. He acknowledged “adjudication of antitrust disputes virtually turns the judge into a fortuneteller,” deciding between competing “crystal balls.”

T-Mobile has “redefined itself” as a wireless-industry “maverick” that “spurred” AT&T and Verizon to “make numerous pro-consumer changes,” said Marrero. The transaction would “allow the merged company to continue T-Mobile’s undeniably successful business strategy for the foreseeable future,” he said.

The states’ lead counsel in closing argument Jan. 15 referred to Sprint when he repeatedly urged Marrero to “let them compete” and thrive as an independent company. The decision showed the judge was unswayed. Sprint “has made valiant attempts to stay competitive in a rapidly developing and capital-intensive market,” Marrero ruled. The “overwhelming view” inside and outside the company is that Sprint “is falling farther and farther short of the targets it must hit to remain relevant and a significant competitor,” he said.

Dish’s “statements at trial” convinced Marrero it will “take advantage of its opportunity” in the wireless space, “aggressively competing” to the “benefit of price-conscious consumers,” said his decision. The judge believes Dish also will open “for consumer use a broad range of spectrum that heretofore remained fallow,” he said.

DOJ’s efforts to establish Dish as a fourth nationwide carrier and replacement for Sprint “comprise the most prominent remedies that contribute substantially to rebutting” the states’ case, said Marrero. The judge believes Dish’s presence as “a new entrant will constitute a substantial incentive to competition," he said. Sprint's prepaid Boost divestiture would be a “strong starting point” for Dish to compete “because of Boost’s considerable success,” he said.

States, during Dec. 18 cross-examination of Dish Chairman Charlie Ergen, tried to depict Dish as having a history of credibility problems and broken promises (see 1912170068). But Marrero was “not persuaded” the evidence they presented “carries the weight” they “ascribe to it” to kill the merger, said the decision. DOJ and the FCC, “to the contrary,” have “strongly supported” Dish’s market entry “despite being fully aware of these concerns,” said Marrero.

Dish, under its FCC commitments, “would stand to lose $2 billion in fines and $12 billion of spectrum if it fails to deploy a nationwide 5G network covering at least 70 percent of the United States population by June 2023,” said the decision .“These potential penalties constitute strong disincentives” for skirting compliance, it said. Its 5G commitments on speed, cellsites and downlink spectrum are “undertakings” that “further increase the likelihood” that a Dish network “will be more than a mere facade,” it said.

'BIG Win,' 'BIG Day'

Marrero’s decision was “a BIG win and a BIG day for the New T-Mobile!” said Chief Operating Officer Mike Sievert, soon to succeed John Legere as CEO. “We are SO ready to bring the New T-Mobile to life!,” closing the deal possibly as soon as April 1, said Sievert. “The #NewTMobile is now 1 step closer to being finalized!!” tweeted Legere. The ruling “validates our view that this merger is in the best interests of the U.S. economy and American consumers,” said Sprint Executive Chairman Marcelo Claure.

The decision “accelerates" Dish's ability "to deploy the nation’s first virtualized, standalone 5G network and bring 5G to America,” said Ergen. “We are eager to begin serving Boost customers while aggressively growing the business as a new competitor, bringing lower prices, greater choice and more innovation.”

New York Attorney General Letitia James blasted Marrero’s decision as “a loss for every American who relies on their cell phone.” The deal “will endanger wireless subscribers" in "their wallets,” she said. The fight to block the sale sends a “strong message” that “even in the face of powerful opposition, we won’t hesitate to stand up for consumers,” said California AG Xavier Becerra. These and the other approximately one dozen AGs challenging the deal are Democrats. President Bill Clinton nominated Marrero for the bench in 1999.

FCC Chairman Ajit Pai hailed “a big win for American consumers.” T-Mobile/Sprint “will help close the digital divide and secure United States leadership in 5G,” he said. The court “rightfully came to the same conclusion in considering the T-Mobile and Sprint merger as I did during my review,” said Commissioner Mike O’Rielly. Marrero was right to reject state AGs' “deeply flawed case,” he said.

AGs “presented a strong case,” countered FCC Commissioner Geoffrey Starks, but the court “saw it differently.” With Dish’s future role as a wireless competitor so “central” to Marrero’s decision, “I remain disappointed that those facts were not fully vetted in the merger that I voted on,” he said. It’s “absolutely essential that the FCC enforce the promises made by these companies,” said Commissioner Jessica Rosenworcel.

Marrero’s ruling “is an important next step toward strengthening competition for high-quality 5G networks that will benefit American consumers nationwide,” said DOJ Antitrust Division Chief Makan Delrahim. His name surfaced repeatedly during trial when plaintiffs tried to unflatteringly portray his private exchanges with Ergen.

The FCC and DOJ “have already determined this transaction is in the public interest,” said Rep. Greg Walden, R-Ore., ranking member on the House Commerce Committee. “I look forward to seeing the New T-Mobile continue to deliver on its commitments to serve rural America and inject further competition into the fast-changing wireless marketplace.”

The deal will be “extremely damaging to competition,” said Consumer Reports. “It will degrade the choices available to consumers, the options for network access, and the incentives to create better and more innovative service,” it said. “Only time will tell” if Dish will ever “grow into a strong competitive alternative for consumers."

Critics Flummoxed

It's "the weirdest antitrust opinion" PK's Harold Feld has read, tweeted the group's senior vice president. Marrero "expressly eschews" economic analysis "in favor of the personalities of the CEOs," Feld emailed us. "It is almost self-parodying in how much the judge relies on his gut rather than traditional rational actor economics." Jurists in such cases usually use witnesses and testimony as ways to weigh what the PK lawyer called "economic and documentary evidence." If the deal proceeds, the group hopes Dish eventually becomes the fourth U.S. wireless competitor, said Legal Director John Bergmayer.

“I’m not in love with the idea of less competition in the market,” but “that’s outside of my hands,” Mississippi Public Service Commission Chairman Brandon Presley (D) told us Tuesday at the NARUC conference in Washington. The NARUC president noted he’s speaking as a Mississippi commissioner. His PSC, which cleared the deal in January 2019 (see 1901110029), “held that up until we satisfied ourselves that our customers in Mississippi were taken care of,” the chair said. “Because of federal deregulation, we have become in many instances, unfortunately, the last person that’s talked to,” he said. “That is sad because we are the frontline for the consumer.”

The Rural Wireless Association is “disappointed” with the ruling and hopes the deal can still be blocked in U.S. District Court in Washington or at the CPUC. State AGs “held strong against political pressure and did the right thing for all consumers by refusing to settle for inconsequential concessions,” RWA said.

Free State Foundation is “pleased” the judge “denied the attempt of a minority of states to second-guess the considered decisions” of DOJ and the FCC, said President Randolph May. New America’s Open Technology Institute said the takeover was “plainly illegal from the moment it was announced,” and Congress should investigate how it was handled at DOJ and the FCC.

Marrero’s decision “subverts the Clayton Act” on federal antitrust law and “permits otherwise illegal mergers if the merging corporations can establish productive efficiencies,” said Open Markets. The ruling will mean higher prices and will “disproportionately harm low-income people and communities of color,” said Free Press.

While T-Mobile and Sprint “focused on a merger” the past two years, “Verizon has remained focused on what we’ve done for the past 20 years -- providing customers with the nation’s most reliable wireless network,” said the carrier. “Regardless of what happens when these two companies eventually get together, our customer-focused mission remains.” AT&T didn’t comment.

Sprint surged 78 percent to $8.52. T-Mobile ended the day up 12 percent at $94.49. Dish gained 7.1 percent to $39.48.