A group of state attorneys general are suing to block the proposed merger of Sprint and T-Mobile US, taking the merger to the courts even before any decisions are handed down from the Department of Justice and the Federal Communications Commission.
The 10 states joining the lawsuit are Colorado, California, New York, Wisconsin, Maryland, Mississippi, Michigan, Connecticut, Virginia and the District of Columbia. The suit was filed in federal court, in the Southern District of New York.
Although the Department of Justice and the Federal Communications Commission have not yet officially weighed in on the merger, the outlook appeared positive for the New T-Mobile (as the would-be merged company is called) in recent weeks. FCC Chairman Ajit Pai indicated that the merger has his support after public commitments from T-Mobile US and Sprint on items such as its timeline for nationwide 5G deployment, service to rural areas and divesting prepaid brand Boost Mobile. FCC Commissioner Brendan Carr also said publicly that he will support the merger.
The state AG lawsuit adds another hurdle and puts a question mark on the timeline of the merger, which the two companies had hoped to accomplish by July.
In their filing, the state AGs argued that the merger will harm competition and that “preserving vigorous competition for mobile wireless telecommunications services is essential to ensure continued innovation and low prices for American consumers.” The complaint noted that the four national wireless carriers serve at least 90% of the U.S. population.
The state AGs said that “for many years T-Mobile’s controlling shareholder, Deutsche Telekom AG, has believed that it would be in its economic interest to reduce the number of MNOs in the United States from four to three … enabling it to earn a greater return on its investment” and first attempting to merge with AT&T.
In some markets, such as the New York City metropolitan area, the New T-Mobile would have more than 50% of subscribers, according to the filing, which said that the combined market share of the new company “would result in an increase in market concentration that significantly exceeds the thresholds at which mergers are presumed to violate antitrust laws.” The filing went on to say that the increased market concentration “does not fully reflect the harm to competition that would result,” because Sprint and T-Mobile US are direct competitors.
“The merger will negatively impact all retail mobile wireless telecommunications service subscribers but will be particularly harmful to prepaid subscribers,” the state AGs said. They went on to add that the commitments made by the two companies to the FCC — including the divestiture of prepaid brand Boost Mobile — “do not resolve the harms to competition that will result if the merger proceeds.”
Even if Boost were divested, the state AGs said, the merger would still result in market concentration levels that are “presumptively anticompetitive.”
“As an MVNO, Boost Mobile would be required to purchase network access from one of the remaining MNOs, with that MNO controlling, indirectly, the prices Boost Mobile could charge and the quality it could office. Because Boost Mobile would not be able to compete on the basis of price or quality, it would not be a sufficient competitive constraint on the New T-Mobile,” the filing says.
Meanwhile, all those promises about building a nationwide 5G network, offering in-home broadband and helping to close the digital divide that T-Mobile US and Sprint made? The state AGs shrugged them off as not making up for the harm that they say the merger will do to competition in the wireless market.
“The proposed commitments do not provide verifiable, merger-specific benefits to retail mobile wireless telecommunications subscribers when compared to the probable state of competition without the merger,” the filing said.