On Tuesday, the Federal Communications Commission (“FCC”) approved the proposed merger of cellular service providers T-Mobile USA and MetroPCS.  In its written opinion and order, the FCC’s Wireless Bureau concluded that the proposed merger would benefit competition in the wireless market by, among other things, providing the combined company with greater spectrum resources for its LTE network.  The Bureau’s action underscores the value that federal policymakers place on maintaining four national carriers―an issue that came to the forefront when regulators rejected the bid of the 2nd-largest carrier, AT&T, to acquire T-Mobile in December 2011.

After reviewing the relevant product and geographic markets, the FCC observed that the merger of T-Mobile and MetroPCS could create limited competitive harms in a few local geographic markets.  However, those harms were outweighed by the public interest benefits likely to accrue from the merger, including “the expansion of the MetroPCS brand into new geographical markets, the development of a more robust, national network, improved quality of service,” and the strengthening of T-Mobile’s “ability to compete in the mobile broadband services market.”  The agency was persuaded that the merger would permit existing MetroPCS customers access to a larger network (and bring the MetroPCS brand to markets in which it does not currently compete).  The merger also would give T-Mobile customers better service quality — particularly in major metropolitan markets, where the combination of the T-Mobile and MetroPCS networks would bolster service in areas where the T-Mobile network was already at capacity. 

In addition, the agency emphasized that the merger could give the combined entity the resources it needed to facilitate the deployment of a next-generation LTE network, bolstering competition in that market.  Because the two companies would merge their network assets and spectrum, the FCC concluded the combined entity “would provide for a broader, deeper, and faster LTE deployment than either company could accomplish on its own.”

FCC Chairman Julius Genachowski issued a short statement on the merger approval, noting the decision reflected the agency’s focus on accelerating broadband built-out and promoting competition in that space.  Genachowski also noted that “challenges remain,” including “the need to unleash even more spectrum for mobile broadband and continuing to promote competition and protect consumers.”

The Department of Justice approved the merger earlier in March.  The parties await approval of the U.S. Committee on Foreign Investment in the United States, an interagency committee that has a role in light of T-Mobile’s foreign (German) ownership. But this is not expected to be an obstacle, as the national security agencies (which also are members of CFIUS) already have signaled their approval as part of the FCC review process.  The only other major step before the companies can combine is a vote of MetroPCS shareholders, now scheduled for April 12.