(Reuters) – A group of potential buyers are preparing bids for prepaid wireless brand Boost Mobile in an upcoming sale valuing the offshoot of U.S. wireless carriers T-Mobile US Inc and Sprint Corp at up to $3 billion, interested buyers told Reuters.

The $26 billion deal between T-Mobile and Sprint won approval from the U.S. Federal Communications Commission last week after the two carriers offered concessions. It included the sale of Boost to reduce the combined company’s market share in the prepaid wireless business, where customers pay for phone service at the beginning of the month and are not required to pass a credit check.

While the deal awaits a ruling from the U.S. Department of Justice, interested parties are already preparing bids. The sale process is expected to begin after the Justice Department’s review.

Q Link Wireless, a prepaid brand and the third-largest provider of federally assisted wireless plans, is putting together a package to bid for Boost with private equity backing and could pay between $1.8 billion to $3 billion, founder and Chief Executive Issa Asad told Reuters.

The price will depend on the quality of Boost’s customers, such as their level of churn, or the rate of customer cancellations, the devices they are using, and what type of phone plan they are on, none of which the companies have disclosed, he said.

This month, analysts at Cowen estimated Boost has 7 million to 8 million customers and a transaction could be valued at $4.5 billion if the deal included wireless spectrum, or the airwaves that carry data, and facilities. Sprint has not disclosed the number of Boost customers.

Stephen Stokols, chief executive officer of prepaid wireless company FreedomPop, said an undisclosed private equity group he is speaking with have placed Boost’s future value at about $4 billion, such as in an initial public offering.

While FreedomPop is not a bidder, Stokols said he is advising a private equity group preparing a bid. If that bid succeeds, he believes the group would combine their acquisition with FreedomPop and have him lead a combined company with the Boost assets.

Peter Adderton, founder of Boost Mobile who sold the U.S. business to Nextel in 2004, which was then acquired by Sprint, has also said he is interested in buying back Boost. He declined to comment on his valuation for the business.

Adderton said he and his lawyers have urged regulators to require T-Mobile and Sprint to also divest wireless spectrum to ensure Boost will be a viable competitor in the market.

Adderton added that regulators must also ensure the new T-Mobile does not employ anticompetitive practices to harm Boost, and the contract between the companies should be non-exclusive, which would allow Boost to buy network access from other carriers.

The current sale agreement is devoid of details, but with the right terms, “we can create a dynamic player that will compete in the market,” Adderton said of Boost.

T-Mobile and Sprint did not immediately respond to requests for comment.

Reporting by Sheila Dang; Editing by Kenneth Li and Lisa Shumaker

Altice USA could be your next cell phone provider, if you subscribe to Cablevision’s broadband service in the metro New York City area.

The Wall Street Journal reports Altice is preparing to launch an unlimited calling/texting/data plan that will cost between $20-30 per month, powered by Cablevision’s in-home Wi-Fi, its network of public Wi-Fi hotspots, and Sprint’s 4G LTE network.

The service, likely to be called Altice Mobile, is the latest entry from cable operators pitching low cost mobile service as an incentive to keep customers from switching providers. Altice will charge dramatically less for its unlimited plan than Xfinity Mobile and Spectrum Mobile ($45) — both reselling Verizon Wireless service — (with speeds reduced to 1 Mbps download and 512 kbps upload after 20 GB of data usage in a month.)

Customers using AT&T and Verizon pay even more. Unlimited monthly plans for a single phone start at $80 at Verizon and $70 at AT&T, depending on bundling certain other AT&T-owned services. For less than half the price, Altice Mobile would deliver all the same services larger providers offer, although Altice intends to offload as much usage as possible to its network of Wi-Fi hotspots, to keep costs low. Before Altice acquired the cable company, Cablevision built a major Wi-Fi presence in the New York City metro areas where it provides cable service. Altice announced it intends to strengthen that network to support its mobile initiative, including the possibility of deploying its own small cell network.

Where Altice cannot supply its own wireless connection, it will rely on Sprint to take over, paying the cell phone company for its customers’ traffic. In return, Sprint will be able to bolster its network in Altice’s service area, perhaps even using Altice’s fiber-to-the-home network, now under construction. That could help Sprint launch 5G service relatively soon in the region, regardless of whether its pending merger with T-Mobile USA is approved. To protect the venture, Altice has secured an agreement with both T-Mobile and Sprint not to terminate its contractual agreement with Sprint should a merger be approved. But the service will still be dependent on network owners like Sprint willing to sell connectivity. Should Altice Mobile take a significant share of the market, network owners may be reluctant to renew such contracts, or price them much higher at renewal time, raising prices.

The cable industry’s incentive for getting into the wireless business, even if it proves unprofitable, is plain to see. All entrants require their mobile customers to maintain a broadband account in good standing to qualify for mobile service. Comcast, Charter, and Altice are aware their video packages are increasingly untenable in a cord-cutter’s marketplace, but maintaining internet service remains essential. In most areas where the cable operators provide service, Verizon or AT&T also sells both broadband and wireless service. Customers may be reluctant to bounce between providers looking for a better deal if they also have to switch mobile providers at the same time.

Staffers working for the antitrust division of the Department of Justice have recommended the agency sue to block the merger of T-Mobile and Sprint, arguing it will reduce competition and raise prices for consumers.

Two sources familiar with the matter told CNBC staffers have been skeptical of the merger and recommended blocking it on antitrust grounds. But the final decision will rest with President Donald Trump’s political appointees, notably Makan Delrahim, who heads the antitrust division. Delrahim can agree, modify, or reject the staffers’ recommendations.

The disclosure hammered Sprint shares earlier this morning in pre-market trading. Wall Street analysts are likely experiencing significant headaches trying to predict where the deal will ultimately end up. Earlier this week, the FCC’s Republican majority signaled they were prepared to approve the merger, based on concessions including the spinoff of prepaid Boost Mobile, which resells Sprint service.

A final decision from the Justice Department is likely to be announced in June.

Bloomberg News is reporting this afternoon that the Justice Department is leaning against the merger of T-Mobile and Sprint, because the proposed concessions offered by the two companies this morning do not resolve antitrust concerns, according to a person familiar with the review.

News of the reported opposition leaked out on the same day FCC Chairman Ajit Pai offered his support of the T-Mobile/Sprint merger, sparking media speculation Pai would not have issued his unqualified support unless the Justice Department was likely to follow suit.

If Bloomberg’s source is correct, the opposition on antitrust and competition grounds would be a major setback for the merger. Bloomberg reports that the fate of the deal now likely rests with Makan Delrahim, the head of the antitrust division of the Justice Department. Delrahim must weigh whether the merger would hurt competition and raise prices. If it would, he would likely seek to block the $26.5 billion deal.

The news has stemmed the telecom rally on Wall Street. Sprint was still trading up 14% at $7.08 at 2:44 p.m. in New York, but gave up half of its earlier gains. T-Mobile also has slowed and was up 2.9% to $77.52.

Pai

FCC Chairman Ajit Pai found a lot to like about the proposed merger of T-Mobile and Sprint and has recommended his fellow commissioners approve the transaction after the companies offered new commitments to ease anti-competitive and anti-trust concerns.

That typically means the FCC’s 3-2 Republican majority will quickly approve the deal in a forthcoming vote, with three Republicans in favor and two Democrats opposed, if tradition holds.

Pai’s support for the merger is hardly surprising. Since joining the FCC as a commissioner in the second half of the Obama Administration, Pai has consistently opposed every pro-consumer item on the FCC’s docket. He loves industry-consolidating mergers, hates telecom companies being forced to open their businesses to competition on things like set-top boxes, and considers almost all pro-consumer protection policies from net neutrality to merger deal conditions examples of “overregulation” that he argues are harmful to the free market and investment.

The troubled merger, which would create what we will call T-Sprint, has remained under review for months, recently stalled over revelations the two companies tailored the transaction to appeal to President Trump. T-Mobile executives spent $195,000 repeatedly renting rooms at the Trump International Hotel in Washington and spent large sums hiring Trump-connected “advisors” including Reince Priebus and Corey Lewandowski. The merger pitch was changed to emphasize its impact on rapidly growing 5G networks, a talking point favorite of President Trump, who wants to beat the Chinese over the development of next generation wireless networks.

The merger must win approval from both the FCC and the Justice Department. The latter is said to be troubled about the anti-competitive impact of reducing the number of national wireless carriers from four to three. Such a consolidation would likely permanently change the wireless competition paradigm, because there has been no interest among new entrants to construct multi-billion dollar national cellular networks to compete with established wireless companies.

On Monday, T-Mobile and Sprint delivered additional concessions which seem to have won the approval of Mr. Pai.

“Two of the FCC’s top priorities are closing the digital divide in rural America and advancing United States leadership in 5G, the next generation of wireless connectivity,” Pai said in a statement Monday. “The commitments made today by T-Mobile and Sprint would substantially advance each of these critical objectives.”

But a closer examination of “T-Sprint’s concessions” shows there is remarkably little there to protect competition and consumers:

• A proposed spin off of prepaid Boost Mobile, which relies on the weaker Sprint network, is hardly much of a concession considering it will likely be impacted by the decommissioning of Sprint’s network, requiring at least some customers to buy new equipment that works on T-Mobile’s network. T-Sprint would also continue to control Boost competitors Virgin Mobile and MetroPCS, putting Boost at a distinct disadvantage.
• The “nationwide” 5G network promised by T-Sprint is replete with fine print. The company will not be formally assessed on its expansion progress for three years, has demanded that T-Mobile’s own employees be allowed to conduct network performance tests — a conflict of interest, and that if it fails to meet its own proposed metrics, the FCC must forego the use of its regulatory forfeiture powers. Instead, the company agrees to pay “voluntary” fines if it fails coverage expansion commitments that are open to wide interpretation and litigation.
• T-Sprint agreed to expand its “5G” coverage, but will rely heavily on existing macro cell towers and low and mid-band spectrum, shared by a much larger number of users than millimeter wave/small cell technology. That will probably deliver a more modest, incremental upgrade over existing 4G LTE technology, not a game-changer that can deliver gigabit speeds to wireless customers. Nothing precludes AT&T and Verizon from deploying similar upgrades without a competition-crushing merger between the third and fourth largest competitors.
• T-Sprint’s proposed wireless home broadband replacement does not include a commitment to provide unlimited service. In fact, vague language in the commitment letter suggests T-Sprint will offer the service with a performance and usage expectation akin to other fixed wireless networks. That likely means customers will endure a data cap and speeds that are not comparable to wired technology. Once the company has signed up 9.5 million home broadband customers, any commitments offered to regulators about that service automatically expire.
• The FCC is expected to give up much of its regulatory authority in return for T-Sprint’s commitments. If T-Sprint walks away from its commitments and not invest billions on its network expansion, it can pay a much smaller fine and have its merger obligations disappear. The FCC will not be able to use its more effective compliance power: forfeiture penalties.

T-Sprint’s argument is that this transaction will accelerate the deployment of 5G technology in a war for 5G supremacy with China. But exactly what technology is deployed, on what spectrum, using small cells or macro cell towers, makes a lot of difference. China’s wireless companies are owned and controlled by the Chinese government, which is also underwriting some of the costs. America’s networks are financed with private capital (and customer bills). T-Sprint’s 5G plans are also far less ambitious than those from AT&T and Verizon, and the cost to long-term competition is too high. The FCC should know that.

Congress has noticed that this merger has been rejected before during the Obama Administration for being anti competitive. Nothing has changed with respect to that. But T-Mobile’s lobbying sure has — this time trying to appeal to the Trump Administration for approval. Pai is certainly on board, and that could cost American consumers plenty.

Most telling of all is Wall Street’s reaction to today’s news. A merger that is being sold as as an AT&T/Verizon killer appears to be anything but. Verizon stock rose by 4.2% and AT&T by 4%. Investors recognize that consolidation can mean only one thing: higher prices. It means the end of the wireless price war that had Sprint and T-Mobile taking potshots at their larger rivals, forcing them to cut prices and bring back unlimited data plans.

It would be ruinous for T-Sprint to continue slashing prices and taunting AT&T and Verizon with costly promotions and giveaways. AT&T and Verizon expect T-Sprint will join their comfortable cartel with suspiciously similar plans and pricing, while firing up to 30,000 redundant workers and decommissioning Sprint’s wireless network. That last fact is well known on Wall Street, too. Cellphone tower owners took a beating in the stock market on the news they could lose Sprint as a customer. American Tower was down 1.9%, Crown Castle fell 3.2% and SBA Communications Corp. dropped as much as 4.5%.

The deal still must pass muster with the Justice Department, and attorneys general from multiple U.S. states are also opposing the deal on the state level. But the Republican members of the FCC joining up to support the deal make it more likely that it will eventually get approved.