T-Mobile makes $26 billion bid to acquire Sprint

Photo (c) Tak Yeung - Getty Images

The companies say the deal would speed development of 5G services

As expected, T-Mobile has formally made a bid to acquire rival Sprint in a $26 billion all-stock deal.

The question now is whether the U.S. Justice Department will allow the union or whether antitrust regulators will block the deal, since it would reduce the number of major wireless carriers from four to three.

These proposed deals have been blocked in the past because regulators have said changing the status quo would reduced competition and harm consumers. In announcing the deal, T-mobile anticipated those concerns, trumpeting what it said would be the pro-consumer benefits.

Among the benefits, T-Mobile says the combined companies would have the resources to develop a robust 5G network to compete with Verizon and AT&T.

T-Mobile touts consumer benefits

"The new company will be able to light up a broad and deep 5G network faster than either company could separately," T-Mobile said in its press release. "T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity."

The company cited other possible benefits to a merger: the combined company will have lower costs and greater economies of scale, allowing it to lower prices to consumers. As a bonus, it said the merged company would employ more people than the two companies do separately, creating thousands of new jobs.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience – and do it all so much faster than either company could on its own,” said T-Mobile CEO John Legere.

Hard sell?

As the two smallest major wireless companies, T-Mobile and Sprint have explored ways to join forces in the past. The Obama administration opposed such a merger between the two wireless companies the last time it was proposed. It isn't clear where the Trump administration will come down on the question.

The Justice Department is currently in federal court, seeking to block the proposed merger between AT&T and Time Warner. Even though that union would be a so-called vertical merger -- joining two non-competing companies -- the government alleges the merged entity would be too big and powerful.

Craig Moffett, a founding partner at the Wall Street firm MoffettNathanson, told CNBC Monday morning he believes there is a "50-50 chance" the deal will win approval.

Take an Identity Theft Quiz. Get matched with an Authorized Partner.