US to file antitrust lawsuit to block T-Mobile-Sprint deal

(Bloomberg) – A group of states are filing lawsuits to block Sprint Corp's takeover bid. by T-Mobile US Inc., thereby putting pressure on the Department of Justice to approach the final decision regarding the merger of the two carriers wireless networks.

US attorneys general led by New York-based Letitia James are preparing to file a lawsuit in federal court in New York on Tuesday to end an agreement that will hurt competition and drive up prices for consumers in New York. At least $ 4.5 billion a year.

The challenge of 10 states and the District of Columbia is a major setback for T-Mobile and Sprint's plan to combine and compete with industry leaders, AT & T Inc. and Verizon Communications Inc. ., last month, carriers have crossed a major hurdle when they got the support of their agreement from the chairman of the Federal Communications Commission.

The states, all led by Democrats, are taking the rare step of suing to block the $ 26.5 billion deal while the Department of Justice is still considering the merger. State supervisory authorities have the power to appeal to the courts to block a merger, even though federal officials from the Department of Justice and the FCC approve it. Sprint shares fell 4.8% at 10:18 am in New York. T-Mobile dropped 1.3%.

The representatives of Sprint and T-Mobile did not immediately respond to a request for comment.

The case is putting pressure on Makan Delrahim, head of the Antitrust Division of the Ministry of Justice. It can, on the other hand, with the states, claiming that the merger should be blocked or negotiate a remedy allowing the agreement to continue. Delrahim does not believe that the FCC settlement goes far enough to resolve the competition concerns arising from the deal and is in talks with the companies over new concessions.

What Bloomberg Intelligence says:

T-Mobile, which offers the acquisition of Sprint for $ 27 billion, beyond regulatory hurdles, is not yet done, even though companies have defenses that have a chance. The Department of Justice has shown interest in the competitive potential of 5G technology and by a powerful competitor AT & T and Verizon in this field. The result depends to a large extent on whether the evidence supports T-Mobile's assertions about future market dynamics and 5G competition.

– Jennifer Rie, Litigation Analyst

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According to the US Attorneys General, the T-Mobile and Sprint association would eliminate competition and drive up prices, costing subscribers of both companies about $ 4.5 billion more per year, according to reports. close to the file. This estimate underestimates the true harm, they say, because it does not include the higher prices that AT & T and Verizon could apply in a more consolidated market.

According to the states, in the mobile wireless retail market, excluding corporate accounts, T-Mobile and Sprint would lead AT & T and Verizon in terms of market share. In some parts of the country, their market share would be over 50%, they said. The negative consequences of this merger will disproportionately affect low-income consumers who are the prepaid brands of Sprint and T-Mobile, Boost and Metro, they say.

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According to people who know their thinking well, the state officials do not know if the Ministry of Justice will approve the agreement. They act because after investigating the merger for about a year, they determined that she was violating antitrust laws and that she saw no reason to wait for the Ministry of Justice to Justice makes a decision, said people.

The state investigation, led by the head of the New York antitrust office, Beau Buffier, relied on technical and economic experts, according to one of the people. Their economists are Carl Shapiro of the University of California at Berkeley and Fiona Scott Morton of Yale University, said the official.

This case comes more than a year after T-Mobile and Sprint announced the signing of an agreement, claiming that they could together better compete with Verizon and AT & T while accelerating the deployment of the new generation of wireless technology called 5G. Although a previous merger attempt was thwarted by Obama administration officials, T-Mobile and Sprint were betting on a more receptive audience of the Trump administration.

When a case is closed, the fate of the case rests with a federal judge, who must decide whether it should be blocked for antitrust reasons. Companies could still reach a pre-trial settlement.

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