On May 20, U.S. Federal Communications Commission chairman Ajit Pai and commissioners Michael O'Reilly and Brendan Carr announced that they would recommend that the FCC approve T-Mobile US Inc.'s merger with Sprint Corp., as modified. While these announcements secure FCC approval for the merger, they do not end Sprint and T-Mobile's antitrust battles.

Despite FCC clearance, the proposed Sprint/T-Mobile merger remains under investigation by  antitrust enforcers: the Antitrust Division of the U.S. Department of Justice and several state attorneys general. Clearance by the FCC does not necessarily guarantee that the antitrust enforcers will follow suit. The FCC reviews transactions to determine whether they will be in the “public interest”; whereas, antitrust regulators focus solely on whether the effect of a transaction may be substantially to lessen competition. The FCC and antitrust enforcers historically have generally aligned the outcomes of their investigations, but the different standards of review mean that divergent outcomes are possible.

The FCC announcements came after Sprint and T-Mobile agreed to three major concessions to reduce concerns about their transaction's effects on consumers. First, the merging companies have promised to not increase prices to customers for three years. Second, the merging companies have committed to divest Sprint's Boost prepaid wireless business to a third party if they are allowed to merge. Finally, the merging companies have committed to developing a 5G network that would cover 97% of the nation's population within three years of consummating the merger and 99% of Americans within six years of consummation.

Sprint and T-Mobile's commitment to divest the Boost prepaid business may resolve antitrust enforcers' concerns about the prepaid wireless market if the buyer can operate Boost as a viable competitor. However, even after these concessions, antitrust enforcers may still have concerns that the proposed merger would harm competition in markets for national or local wireless services.

The parties' commitment not to raise prices to wireless customers for a period of three years post-merger does not necessarily resolve all potential antitrust concerns. First, the DOJ and state attorneys general may have concerns that Sprint and T-Mobile may defer maintenance or take other actions that could lower the quality of service, resulting in less value to consumers even if they are paying the same price per month.

Furthermore, Sprint and T-Mobile have agreed to limit their pricing power only for three years. The DOJ and state attorneys general almost certainly will evaluate the merger's effect on prices after that price freeze is lifted. Moreover, a commitment not to raise prices could be viewed by antitrust agencies as a signal that without such commitment the transaction would allow the combined entity to raise prices.

Sprint and T-Mobile likely will argue that the potential anti-competitive harm from their pricing power three years out will be offset by the benefits consumers receive from the development of the 5G network. But proving these types of consumer benefits can be a significant uphill battle. Sprint and T-Mobile will have to convince antitrust enforcers that their merger would facilitate the development of a 5G network that would not be possible “but for” the merger. Because Sprint and T-Mobile talked publicly about implementing a 5G network before announcing their merger, it may be difficult to convince antitrust regulators that a merger is necessary to build the network.

Furthermore, even if the DOJ and state attorneys general believe the merger will facilitate the parties' 5G commitments, the parties would still have to demonstrate that the potential benefits of the 5G network outweigh the possible anti-competitive effects of the transaction. Antitrust enforcers may reach a different conclusion to this balancing question in a nationwide wireless market than in more localized markets. Sprint and T-Mobile's concession to develop a 5G network covering 99% of Americans in six years would only include 90% of rural Americans. The DOJ or state attorneys general may be persuaded that the benefits of the 5G network will outweigh the potential anti-competitive effects in most geographic markets, but they may still have concerns about certain local markets.

The concessions promised by Sprint and T-Mobile are significant and go a long way toward persuading antitrust enforcers to allow their proposed merger to proceed. These concessions, however, may still leave room for concerns about anti-competitive harm and do not mean that the deal necessarily will cross the finish line without challenge or additional concessions.

Amanda Wait and Gerald Stein are part of Norton Rose Fulbright's 150-lawyer global antitrust practice, respectively in Washington, D.C., and New York. Both are former attorneys in the Bureau of Competition at the Federal Trade Commission.