Sprint and T-Mobile have considered merging for more than five years, since even before Japanese billionaire and telecom expert Masayoshi Son bought control of Sprint in 2013. Last fall, the two wireless carriers came close, but the talks fell apart at the last moment. Now the deal is back on. T-Mobile and its majority owner, Deutsche Telekom, agreed on Sunday to merge the U.S. unit with its smaller rival after Son finally agreed to cede control of the new entity to Telekom.
“We’ve been going at it for a long time,” Sprint CEO Marcelo Claure tells Fortune in a joint interview with T-Mobile CEO John Legere on Sunday evening. “We both agreed that the opportunity in front of us is too large to let it pass.”
Still the deal faces possibly tough scrutiny in Washington, D.C., where regulators scuttled Son’s 2014 attempt to merge with T-Mobile and also blocked AT&T’s 2011 effort to buy T-Mobile. Reducing the U.S. wireless industry to three major providers from four has been the sticking point every time.
But the antitrust climate in D.C. may have changed, and not just because the current president is decidedly more pro-business than his predecessor. The capitol has become caught up in a kind of 5G mania, a level of concern and excitement over the next generation of wireless networks that has fueled everything from the rescue of Qualcomm (QCOM) from an unfriendly acquisition to the persecution of Huawei and ZTE and banning of sales of some Chinese-made telecom gear.
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How the political mania over 5G led back to a Sprint-T-Mobile merger started back in February, when a controversial White House position paper on 5G and the wireless industry leaked.
In an interview back then with John Legere in his corner office in Bellevue, near Seattle, the T-Mobile CEO was animated in explaining why merger talks with rival Sprint had fallen apart a few months earlier. Then out of the blue, he brought up the leaked paper.
Authored by a National Security Council staffer, the brief laid out the case in alarmist language that the United States was falling deeply behind China in the race to build the next generation of wireless network, known as 5G. The author wrote of a potential security catastrophe that might befall U.S. carriers dependent only on Chinese suppliers. So the paper recommended the radical step that the government should start a crash program to build the 5G network itself and lease it to the carriers, or, as it was headlined: “The Eisenhower National Highway System for the Information Age.”
Legere and his fellow telecom industry leaders had zero interest in a nationalized 5G network. But the alarmist rhetoric about the need to speed up private infrastructure spending on 5G? That could come in handy.
Just after saying “never say never” about the Sprint merger plan’s demise, he picked up a copy of the NSC paper lying on his desk. “The fascination around 5G and the importance around 5G is going to get a great lift out of this,” he said. “And it may adjust Washington’s stance on what’s more important to the future of the industry in 5G, having X amount of players or doing things that allow the investment and the speed to get 5G to be done. So never say never.”
On Sunday, as Legere and Claure took the wraps off the $26.5 billion deal to merge their companies, the race to 5G was at the center of their pitch, just as Legere had predicted.
“The awareness by the United States of its trailing countries like China and the possibilities of what we could do together that neither of us can do alone nor anyone else in the country is doing or could do—that became kind of the pushing point for this last emphatic push,” Legere told Fortune in Sunday’s interview with the two CEOs.
Analysts aren’t sure whether Washington’s new focus on 5G will be enough to overcome the basic antitrust analysis that waylaid prior deals. Viewed via traditional tests of competition, like the Justice Department’s favored metric, the Herfindahl-Hirschman Index, the combination appears strongly anticompetitive, Craig Moffett at MoffettNathanson Research, noted on Monday. But the argument that together T-Mobile (TMUS) and Sprint (S) could build a 5G network more quickly is also compelling, Moffett added.
“Ultimately, whether the deal is approved or rejected is likely to come down to whether the companies can convince the DOJ that consumer welfare is best measured not through the traditional lens of lower prices but instead through the lens of access to the latest and greatest technology,” Moffett concluded, giving the deal 50/50 odds of approval.
Legere, who would remain CEO of the combined company, and Claure, who would be reduced to a board member role, aren’t willing to cede the competition point, either.
“If you really think about what our competitors face in this, it is even more competition, even more aggressive behavior by us on behalf of consumers, even more driving to respond to what consumers want,” Legere says.
“As you build this 5G network with our spectrum assets, we’re going to have the lower cost,” Claure adds. “We’ve both been price leaders and we’ll continue to do that. Think of a world where you have the absolute best product at the lowest available price.”
Earlier on Sunday, the two CEOs made courtesy calls to Ajit Pai, chairman of the Federal Communications Commission, and the members of the agency. But the companies hadn’t yet spoken to the Justice Department, likely the tougher regulator to get on board, or made formal applications for approval to either body.
“One of the reasons we’re enthusiastic about it is we know all of the ways they’re going to view these questions and the answers are all in the best interests of all parties involved,” says Legere.
