On Tuesday, the Federal Communications Commission approved the merger of T-Mobile USA with MetroPCS, a $1.5 billion deal that combines two underdogs into a stronger rival to wireless giants Verizon Wireless and AT&T.
The FCC said the deal is good for consumers because it would quicken the pace of telecom investments and that combined, the firms would be a stronger alternative to the industry’s biggest companies.
The Justice Department separately confirmed on Tuesday that it had also approved the deal, which combines the nation’s fourth- and fifth-largest wireless carriers amid increasing concern that the smartphone-dependent nation has faced increased cell phone bills because of less competition.
Justice said the companies don’t compete directly against each other, and in most of MetroPCS’ metropolitan markets, consumers have enough alternatives to choose from.
“Today’s action will benefit millions of American consumers and help the U.S. maintain the global leadership in mobile it has regained in recent years,” FCC Chairman Julius Genachowski said in a statement.
The deal must still be approved by the Committee on Foreign Investment in the United States because T-Mobile is owned by Germany’s Deutsche Telekom. But the merger is widely expected to be blessed because of U.S. officials’ strong desire for greater competition in the $178 billion wireless market.
Under terms of the deal, Deutsche Telekom will pay MetroPCS $1.5 billion in cash for a 74 percent stake in the firm, whose pre-paid phones have become popular among urban and low- income customers. The combined firm will have about 43 million subscribers.
The firms argued to regulators that together, they would combine their wireless airwaves to create more robust networks that reach more Americans. Some MetroPCS shareholders have been critical of the deal and how it could hurt their investments. The labor union Communications Workers of America fears the transaction will lead to job losses.
MetroPCS shareholders will vote April 12 on the merger.
The deal is the latest in a wild ride by Deutsche Telekom’s T-Mobile, a firm based in Kirkland, Wash., that has struggled to get the hottest devices first and to obtain high-quality airwaves gobbled up by Verizon and AT&T in spectrum auctions.
U.S. officials rejected AT&T’s proposed merger with T-Mobile in late 2011. That deal, regulators said, would make industry leader AT&T too big and remove from the market a scrappy rival that typically provides more affordable service plans.
Genachowski has credited the FCC’s and DOJ’s decision to reject T-Mobile’s previous attempt to merge with AT&T as a pivotal decision for the telecom market. They have insisted that smaller rivals should be encouraged to challenge the dominance of Verizon Wireless and AT&T, which have about six out of 10 mobile device subscriptions.
Competition in the wireless industry has become a major issue, pushed largely by consumer advocacy groups who say mobile device users are saddled with ever-increasing wireless bills, data caps and congested networks.
The FCC will design an auction for more wireless airwaves next year, and some public interest advocates have called for limits on how much spectrum Verizon Wireless and AT&T should be able to purchase.