Ten American states sue to prevent Sprint-T-Mobile merger and 'protect poorest citizens'

News

The ten, led by New York and California, have filed a lawsuit to stop T-Mobile's $26 billion acquisition of Sprint.

T-Mobile is a wholly owned subsidiary of Deutsche Telekom, and one of its main engines of growth.

Sprint is controlled by Japan’s SoftBank Group Ltd.

Neither had commented at the time of writing.

The US market is dominated by Verizon and AT&T, both of which are far larger than either T-Mobile or Sprint.

The states say prices to consumers will rise as a result of the merger, due to less competition, according to a Reuters report.

The complaint was filed in the US District Court for the Southern District of New York.

Less rivalry costs

Attorneys General from the states have apparently run investigations into the proposed tie-up, which would take result in three national mobile operators instead of four.

The two companies have already guaranteed not to increase prices for the next three years.

The complaint states that less competition would cost the joint company’s retail customers more than $4.5 billion (about €3.98 billion) a year.

Many who oppose the deal claim it would lead to higher charges for the poorest Americans.

Reuters cited data from Kagan, S&P Global Market Intelligence showing that T-Mobile is the most popular among customers who make less than $75,000 per year.
Some 83% of Sprint’s Boost Mobile prepaid customers are also in that income bracket.

Competition works

The states said in their complaint, “Direct competition between Sprint and T-Mobile has led to lower prices, higher quality service, and more features for consumers. If consummated, the merger will eliminate the competition between Sprint and T-Mobile.”

The companies have said they’d divest Boost would perhaps even divest wireless spectrum, but clearly this is not enough for the ten states nor the Department of Justice (DoJ).

It has recommended that the telecoms regulator, the Federal Communications Commission (FCC), should block the deal, despite the fact that the deal won the backing of the majority of commissioners at the FCC.

It seems that if the court case goes ahead, the court, not the DoJ, would have the final say. Although States Attorneys General often try to block mergers, apparently they rarely do it without support from a powerful ally.