(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

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.

WASHINGTON (Reuters) – T-Mobile US Inc’s $26 billion acquisition of rival Sprint Corp won the support of the head of the Federal Communications Commission on Monday, in a big step toward the deal’s approval.

FCC Chairman Ajit Pai, a Republican, came out in favor of the combination after the companies offered concessions including selling Sprint’s Boost Mobile prepaid cell service.

Sprint shares surged 23.2% while T-Mobile shares rose 5.1%. If okayed by the FCC, the deal would still need approval from the U.S. Justice Department’s antitrust division.

If the deal is completed, the number of U.S. wireless carriers would drop to three from four, with Verizon Communications Inc and AT&T Inc leading the pack.

Some telecommunications experts have predicted that prices for cell phone service would rise as a result, and U.S. Senator Richard Blumenthal agreed.

“The FCC’s seeming abdication makes it even more important for the Department of Justice to step up to the plate to block this merger,” the Democratic senator said in a statement.

Pai will recommend that the other four FCC commissioners vote to approve the merger. Commissioner Brendan Carr, a Republican, said on Monday he will vote in favor.

The third Republican, Mike O’Rielly, did not reply to a request for comment. The Commission is made up of three Republicans and two Democrats.

Pai

FCC Commissioner Jessica Rosenworcel, a Democrat, tweeted her disapproval.

“We’ve seen this kind of consolidation in airlines and with drug companies,” she said. “It hasn’t worked out well for consumers. But now the @FCC wants to bless the same kind of consolidation for wireless carriers. I have serious doubts.”

The FCC will not formally vote on the merger on Monday but will first draft an order, two people briefed on the matter said.

The FCC move boded well for the Justice Department to also approve the deal, Citi analysts said in a note.

“While the two federal agencies have different standards of review that could lead to different outcomes, we believe the likelihood for some coordination between the agencies is encouraging for the approval prospects by the (Justice Department),” the note said.

Reviews by state attorneys general and public utility commissions could push full approval back to the third quarter of this year, the Citi note said.

CONCESSIONS

In a filing with the FCC on Monday, the companies pledged to sell prepaid wireless provider Boost Mobile.

The sale will include the brand name, any active accounts and dedicated Boost assets and staff but no wireless spectrum. The new Boost could buy network access from T-Mobile for at least six years.

One critic of the deal called the concession weak.

“I don’t understand how the mere spinning off of one of three prepaid services would satisfy (Pai), given all the evidence in the record that post-paid (wireless) prices will go up,” said Gigi Sohn, who held a senior FCC position during the Obama administration. “I just think this is very weak tea.”

The Boost sale is aimed at resolving concerns that the deal would give the combined company 54% of the prepaid market, which generally includes those with poor credit who cannot pay with a credit card.

T-Mobile, which is about 63 percent owned by Deutsche Telekom AG, also promised the new company would build a “world-leading” 5G network, which is supposed to be the next generation of wireless service. It promises to give rural Americans robust 5G broadband and enhance home broadband.

The FCC and Justice Department had been expected to make a decision in early June. They have been weighing potential a loss of competition and higher prices for consumers against the prospect of a more powerful No. 3 wireless carrier that can build a faster, better 5G network.

T-Mobile has about 80 million customers and Sprint has about 55 million customers.

Reporting by David Shepardson and Diane Bartz, additional reporting by Douglas Busvine in Frankfurt; Editing by Susan Heavey, Paul Simao and Jeffrey Benkoe

The merger of AT&T and Time Warner (Entertainment) is safe.

A federal appeals court in Washington handed the U.S. Department of Justice its worst defeat in 40 years as federal regulators fought to oppose a huge “vertical” merger among two unrelated companies.

In a one page, two-sentence ruling, a three judge panel affirmed the lower District of Columbia Circuit Court decision that approved the $80 billion merger without conditions. In the lower court, Judge Richard Leon ruled there was no evidence AT&T would use the merger to unfairly restrict competition, a decision that was scorned by Justice Department lawyers and consumer groups, both claiming the merger would allow AT&T to raise prices and restrict or impede competitors’ access to AT&T-owned networks.

In this short one-page ruling, a three judge panel of the D.C. Court of Appeals sustained a lower court’s decision to allow the merger of AT&T and Time Warner, Inc. without any deal conditions.

The Justice Department and its legal team seemed to repeatedly irritate Judge Leon in the lower court during arguments in 2018, making it an increasingly uphill battle for the anti-merger side to win.

Judge Leon

Unsealed transcripts of confidential bench conferences with the attorneys arguing the case, made public in August 2018, showed Department of Justice lawyers repeatedly losing rulings:

• Judge Leon complained that the Justice Department used younger lawyers to question top company executives, leading to this remarkable concession by DoJ Attorney Craig Conrath: “I want to tell you that we’ve listened very carefully and appreciate your comments, and over the course of this week and really the rest of the trial, you’ll be seeing more very gray hair, your honor.”
• Leon grew bored with testimony from Cox Communications that suggested Cox would be forced to pay more for access to Turner Networks. Leon told the Cox executive to leave the stand and demanded to know “why is this witness here?”
• Leon limited what Justice lawyers could question AT&T CEO Randall Stephenson about regarding AT&T’s submissions to the FCC.
• Justice Department lawyer Eric Walsh received especially harsh treatment by Judge Leon after the Justice lawyer tried to question a Turner executive about remarks made in an on-air interview with CNBC in 2016. Leon told Walsh he already ruled that question out of order and warned, “don’t pull that kind of crap again in this courtroom.”

During the trial, AT&T managed to slip in the fact one of its lawyers was making a generous contribution towards the unveiling of an official portrait of Judge Leon, while oddly suggesting the contribution was totally anonymous.

“One of our lawyers on our team was asked to make an anonymous contribution to a fund for the unveiling of your portrait,” AT&T lawyer Daniel Petrocelli told the judge. “He would like to do so and I cleared it with Mr. Conrath, but it’s totally anonymous.”

Leon responded he had no problem with that, claiming “I don’t even know who gives anything.”

AT&T also attempted to argue that the Justice Department case against the merger was prompted by public objections to the merger by President Trump, who promised to block the deal if he won the presidency. That clearly will not happen any longer, and it is unlikely the Justice Department will make any further efforts to block the deal.

AT&T received initial approval of its merger back in June and almost immediately proceeded integrating the two companies as if the Justice Department appeal did not exist. The Justice Department can still attempt to appeal today’s decision to the U.S. Supreme Court, something AT&T hopes the DoJ will not attempt.

“While we respect the important role that the U.S. Department of Justice plays in the merger review process, we trust that today’s unanimous decision from the D.C. Circuit will end this litigation,” AT&T said in a statement.