T-Mobile and Sprint promise to fight the state's GAs if they get DOJ's approval



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T-Mobile US. Inc., and Sprint Corp., are ready to fight the 10 state attorneys general for blocking their merger if the US Department of Justice approves the deal, FOX Business Network has learned.

The Attorney General's coalition led by Attorney General of New York State, Letitia James, and the Swedish Xavier Beccera on Tuesday initiated a lawsuit in a Manhattan federal court to put an end to the agreement. for antitrust reasons, believing that the merger would reduce the number of large wireless service providers to three. and eventually lead to higher prices for consumers. This decision briefly interrupted negotiations between the companies and the Antitrust Division of the Department of Justice, which were making progress in finding a possible solution.

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But on Wednesday, T-Mobile and Sprint officials both resumed their consultations with the Antitrust Division of the Department of Justice and mostly developed a legal strategy to fight the lawsuit against the AG, according to the people in the know.

This strategy consists of trying to convince the Department of Justice to approve the agreement and, if necessary, to fight against what the companies consider as a long-term attempt to block the merger by the states, said these people. The companies believe that even if a court issued an injunction to block the transaction, the case was weakened by the fact that it had been filed before the end of discussions between the DOJ and the companies regarding their agreement to make further concessions to address antitrust concerns, they added. .

Teleprinter security Latest Change % Chg
TMUS T-MOBILE US INC 75.38 -0.08 -0.11%
S SPRINT CORP. 6.63 +0.05 + 0.76%

T-Mobile and Sprint press representatives made no comments. A spokesman for the DOJ also declined to comment. A spokesman for the New York Attorney General has made no comments in the immediate future.

Despite recent changes in the merger, officials at T-Mobile and Sprint believe the final decision of the antitrust division of the Justice Department could be made next week.

In their negotiations with the Justice Department, T-Mobile and Sprint discussed concessions, including the sale of wireless spectrum and other activities outside of Sprint's prepaid Boost Mobile service. The companies have agreed to sell Boost, expand their rural network and not increase wireless prices for three years to obtain approval from the Federal Communications Commission for the merger to be completed.

State attorneys general "saw what the DOJ was likely to propose as a cure and did not like it, so they jumped the rifle and sued."

Peter Adderton, founder of Boost

The Trump administration has made the development of fifth generation wireless networks, also called 5G, both a national security goal and an economic goal. The development of such ultra-fast wireless networks is expected to be an economic boom, potentially adding hundreds of billions of dollars to the US gross domestic product. The companies have also argued that a combined T-Mobile and Sprint would be better able to compete with the AT & T and Verizon wireless heavyweights in terms of price and gain ground in the 5G field.

However, Ministry of Justice staff are eager to deny the merger on the grounds that fewer major carriers will result in higher prices – the same argument put forward by state GAs. They may be overturned by the head of antitrust legislation, Makan Delrahim, who is supposed to be officially undecided, but may well agree with the companies' argument that the merger would not result in high prices, especially after the agreement of new concessions.

According to Peter Adderton, founder of Boost, advances in the formation of a set of concessions could be at the origin of the lawsuit. State prosecutors "saw what the DOJ was likely to propose as a solution and did not like it, so they jumped the gun and sued," Adderton said Tuesday in an interview with FOX Business.

Another theory for the prosecution is that "states have just been frustrated by the slow process at DOJ," said Craig Moffett of MoffetNathanson Research. "There is a lot of pressure on the GM to stop this process," he added.

An antitrust attorney, who requested anonymity, said the announcement by the state's GA could indicate that the DOJ is seeking approval for the deal. "State GAs want to take the decision of the GM in advance … and undermine any action [the Department of] Justice will take. "However, a decision with concessions could" take the breath away from the sails of the state, "said this person to FOX Business.

Another possibility is that the Ministry of Justice is seeking legal action and state GAs want to prevent the Trump administration from winning a consumer victory by first filing for trial.

In filing their complaint, the attorneys general blinded Delharim and his staff, who had not been informed of the filing, this person added. Officials from the Antitrust Division of the Department of Justice have recently begun negotiations to appease state attorneys general and to prevent legal action.

FOX Business also learned that the MAs were trying to recruit other states to create the strongest possible case that could find a sympathetic judge to block the agreement or delay it indefinitely through an injunction. "If states get their injunction, it's not a slam dunk but it could complicate the merger," notes Moffett, adding that an injunction could prevent the transaction from closing, forcing one to or the other party to flee.

Nevertheless, legal experts say that states face a difficult battle to try to remove the merger if the DOJ approves it.

Not only do states have fewer resources than the federal government, but they also have a higher bar to prove their case: they must show that the merger would cause "irreparable harm", while the FCC paradigm "General interest" and the DOJ's mandate to maintain competitive markets are much broader and less restrictive, say the experts.

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While the deal in the telecommunications sector continues to face opposition, some of Wall Street are studying what could happen if companies called for resignation. Under an unusual provision, T-Mobile is not required to pay Sprint the agreed termination fee of $ 600 million if Sprint's debt does not have the minimum credit ratings of the three major rating services.

Sprint's debt must have a minimum rating of "B-2" from Moody's Investors Service, a "B" rating from S & P Global and "B-plus" from Fitch Ratings.

Sprint is the smallest of the largest mobile operators, and its finances are considered the most suspicious, contributing to a share price that is just above the level of penny stocks. Ironically, his faltering finances could help the deal get approval; During an interview in April, Delrahim told FOX Business that he was considering "defending failed businesses", which means he was weighing the argument put forward by the leaders of the company. Company that if Sprint was not bought by T-Mobile, he risked going bankrupt. the number of wireless service providers would be reduced.

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