WASHINGTON — The Justice Department is moving closer to approving T-Mobile’s $26 billion merger with Sprint, but only if the companies sell multiple assets to create a new wireless competitor, according to three people familiar with the plan.
If such an arrangement is approved, it could weaken an effort by attorneys general from nine states and the District of Columbia to halt the blockbuster deal with a suit that they filed this week.
The department is pushing T-Mobile and Sprint to sell a prepaid mobile service and valuable radio frequencies that carry data to wireless devices, the people said. The companies have approached three internet and television providers — Dish Network, Charter and Altice — about buying Boost Mobile, a prepaid service owned by Sprint, and airwaves owned by Sprint, one of the people said.
A settlement between the companies and federal regulators could be completed in the next week, the three people said.
The possible agreement is the latest wrinkle in a merger that would reshape the wireless industry. The combined companies would have more than 127 million customers — large enough to challenge Verizon and AT&T, the industry leaders.
Federal regulators have been reviewing the merger for more than a year and have appeared to be getting close to approving it. But the lawsuit by the state attorneys general, all Democrats, added a new roadblock.
If Sprint and T-Mobile win Justice Department approval by selling those assets, the attorneys general might have to reconsider the basis of their suit. The states, led by New York and California, say the merger would lead to higher prices for consumers because it would reduce the number of major carriers to three.
Executives at Sprint and T-Mobile argue the companies need to merge to compete with their bigger rivals and to afford investments in the next generation of wireless technology, known as 5G.
The deal requires approval by both the Justice Department, which enforces antitrust law, and the Federal Communications Commission, which oversees the telecommunications industry.
New York Attorney General Letitia James said this week that the aim of the states’ lawsuit was “to stop the merger in its tracks.” The states argued in their complaint that the merger would cost Sprint and T-Mobile subscribers at least $4.5 billion a year.
But the case could run into trouble because it doesn’t take into account the selling of both Boost and the wireless frequencies to another company, analysts said.