Ten US states file lawsuit to block Sprint-T-Mobile merger

Joanna Estrada
Июня 12, 2019

Ten states led by NY and California filed a lawsuit on Tuesday to stop T-Mobile US Inc's $26 billion purchase of Sprint Corp, warning that consumer prices will jump due to reduced competition.

The lawsuit, led by Letitia James of NY and Xavier Becerra of California, contends that competition will suffer and consumer prices will rise if the companies combine.

In the suit, which you can read here, James and her fellow attorneys general say, "because the effect of T-Mobile's merger with Sprint may be substantially to lessen competition, the Court should permanently enjoin the merger", where enjoin is a legal term meaning "prohibit someone from performing". In addition to California and New York, Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin have joined the complaint, which was filed in Federal District Court in Manhattan.

Consumer advocates, labor unions and many Democratic lawmakers worry that the deal could mean job cuts, higher wireless prices and a hit to the rural cellphone market. Sprint Chief Executive Officer Marcelo Claure and John Legere, his counterpart at T-Mobile, met with Justice Department officials on Monday, according to a source familiar with the matter. "If consummated, the merger will eliminate the competition between Sprint and T-Mobile", the states said in the complaint.

The lawsuit, led by the attorneys general of NY and California, represents a major legal and political headache that could upend the $26 billion telecom tie-up, which also has divided federal regulators in Washington who must bless the deal in order for it to proceed.

More recently, in the Bayer-Monsanto agribusiness merger, five states past year criticized the federal government's approval. The U.S.is in a politically sensitive race with China to be on top as this technology is developed and implemented. Their successors in the Trump administration have not taken a similar stance. "Nor does it prevent T-Mobile from raising prices after the commitment ends".

T-Mobile now has more than 79 million subscribers and is a majority-owned subsidiary of Deutsche Telekom AG.

T-Mobile, trying to reassure critics, promised the FCC it would build out a 5G network and invest in rural broadband on a specific timeframe or pay penalties.

The companies have also offered to sell Boost to reduce the combined company's market share in the prepaid business.

While Pai has blessed the merger, it has not yet formally been approved by the FCC.

Public-interest advocates said these conditions did not address the deal's main criticisms - higher prices in the long run and less wireless competition- and would be hard for regulators to enforce.

The Justice Department evaluates deals using stricter criteria than the FCC's "public interest" standard - namely whether they harm competition and raise prices for consumers. Direct competition between Sprint and T-Mobile has led to lower prices, higher quality service, and more features for consumers.

"This is the third time T-Mobile has tried to merge and shrink the market to three players", said California Attorney General Xavier Becerra. Shares of Sprint were down more than 5 percent in early afternoon trading, while T-Mobile's stock was down about 1.5 percent. So with T-Mobile (TMUS) now trading at $75.35, Sprint's stock (S) should be closer to $7.73 than the current $6.58 if investors were 100% confident that the deal is going to go through.

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