US law chiefs sue Sprint and T-Mobile to prevent ‘harmful’ $26bn merger plan

12 June 2019 | Alan Burkitt-Gray

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Law officers for two of the biggest US states are leading legal action to stop T-Mobile US taking over Sprint in a $26 billion deal.

Letitia James (pictured), attorney general of New York state, and Xavier Becerra, the law chief of California, joined with eight other state attorneys general in saying that a merger would “cause irreparable harm” to US consumers.

The states of New York and California have around 60 million people between them.

They were backed by attorneys general for seven other states – Colorado, Connecticut, Maryland, Michigan, Mississippi, Virginia and Wisconsin, plus the District of Columbia. The total population represented by all 10 law officers is more than 100 million.

“When it comes to corporate power, bigger isn’t always better,” said James. “The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country.”

She added: “That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”

Her Californian opposite number, Becerra, said: “Although T-Mobile and Sprint may be promising faster, better, and cheaper service with this merger, the evidence weighs against it. This merger would hurt the most vulnerable Californians and result in a compressed market with fewer choices and higher prices. Today, along with New York and eight other partner states, we’ve filed a lawsuit to block this merger and protect the residents of our state.”

They filed their complaint in the New York federal court, alleging that the merger of two of the four largest national mobile network operators in the US “would deprive consumers of the benefits of competition and drive up prices for cellphone services”.

They said the average US household spends around $1,100 a year on cellphone services. “For many families, especially those with lower incomes, even a small price increase can result in suspension or cancellation of cellphone service.”

They were backed by the Communications Workers of America (CWA), a union representing many telecoms workers. Chris Shelton, president of the CWA, said: “Reducing the number of national wireless carriers from four to three would mean higher prices for consumers, job loss for retail wireless workers, and downward pressure on all wireless workers’ wages. The states’ action today is a welcome development for American workers and consumers, and a reminder that regulators must take labour market concerns seriously when evaluating mergers.”

They were also supported by the Rural Wireless Association (RWA), in spite of Sprint and T-Mobile’s promise that they would expand rural coverage if their merger is approved.

Carri Bennet, general counsel for the RWA, said: “This merger is bad for competition, and it is bad for consumers, especially those living in or traveling through rural areas, who will experience fewer choices, price increases, and substandard service.”

Last month Sprint and T-Mobile told the Federal Communications Commission (FCC) that a merged company, which has been values at $146 billion would spend $40 billion to build a 5G network that would cover 97% of the US population within three years, including 85% of the rural population. And it would cover 99% of the US population within six years and 90% of the rural population.

Sprint, which is majority-owned by SoftBank, and T-Mobile US, which is majority-owned by Deutsche Telekom, want to create a powerful third operator in the US market to compete with Verizon and AT&T. If the merger were to go ahead, Deutsche Telekom would control the unified operation.