The Faber Report

T-Mobile, Dish reach divestiture deal, pending DOJ concerns: Sources

Key Points
  • T-Mobile, Dish reach deal, pending DOJ concerns: Sources.
  • Parties hope to reach a deal by next week: Sources.
  • T-Mobile wants to limit wholesale capacity to 12.5%.
  • Deutsche Telekom wants to limit any strategic Dish investor to 5%.
T-Mobile CEO John Legere (L) speaks as Sprint CEO Marcelo Claure looks on at the New York Stock Exchange, April 30, 2018.
Brendan McDermid | Reuters

Dish Network and T-Mobile have agreed to a divestiture deal that brings the wireless carrier a step closer to gaining government approval of its merger with Sprint, people familiar with the matter told CNBC's David Faber.

However, there are still issues the Department of Justice is actively focused on before it would allow a deal, the sources added.

While the corporations involved have agreed on some of the largest components of the divestiture deal, the government remains concerned that the agreement isn't enough to ensure Dish would represent meaningful competition following the $26 billion merger between Sprint and T-Mobile.

T-Mobile, Dish reached a deal pending DOJ concerns: Sources

Shares of T-Mobile, Sprint and Dish rallied following the CNBC report, up 1%, 4.6% and 2.1%, respectively.

Justice Department officials want T-Mobile and its parent company, Deutsche Telekom, to sell assets like wireless spectrum licenses and make other promises to help conserve competition in the cellular market.

That's received pushback from T-Mobile, which wants to limit Dish's spectrum capacity to 12.5%, people familiar with the matter told Faber. Deutsche Telekom also wants to limit any strategic Dish investor to 5%, the sources added.

Sprint and T-Mobile announced last year a stock deal that would result in three big nationwide cellphone carriers, decried by those opposed to the merger as anti-competitive. Others argue that the marriage would add scale to the new company in a mature wireless market laser-focused on the development of 5G wireless technology and dominated by Verizon and AT&T.

Dish Chairman Charlie Ergen met with Federal Communications Commission Chairman Ajit Pai and Justice antitrust chief Makan Delrahim mid-June to reiterate "the need for a minimum of four nationwide mobile network operators" to maintain a healthy level of competition, according to a filing with the FCC.

WATCH: Talks continue with regulators over T-Mobile-Sprint merger

Talks continue with DOJ regulators over T-Mobile-Sprint merger