State attorneys general sue to block merger between Sprint and T

T-Mobile’s Sprint Deal Should Be on Death WatchMore

T-Mobile’s Sprint Deal Should Be on Death WatchMore

A group of state attorneys general led by NY and California filed a federal lawsuit Tuesday to block T-Mobile's $26.5 billion bid for Sprint, citing consumer harm.

It's an unusual step ahead of a decision by federal antitrust authorities.

"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 NY and in urban areas across the country", James said in a statement. New York Attorney General Letitia James is the lead on the suit. In addition to California and New York, Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin have joined the complaint, which was filed in Federal District Court in Manhattan.

While AT&T and Verizon dominate the overall USA wireless market, T-Mobile is the most popular among customers who make less than $75,000 per year, and Sprint's Boost Mobile prepaid brand counts 83 percent of its users in that income range, according to Kagan, S&P Global Market Intelligence data.

While T-Mobile and Sprint have made promises that their merger would offer lightning-fast speeds and increased capacity, the Attorneys General investigation found that numerous claimed benefits were unverifiable and could only be delivered years into the future, if ever.

T-Mobile and Sprint have previously argued that combining would allow them to innovate in ways that would benefit consumers. "If consummated, the merger will eliminate the competition between Sprint and T-Mobile and will increase the ability of the three remaining [mobile network operators] to coordinate on pricing", the complaint states.

If the states' lawsuit goes forward, the courts would have the last say, not the Justice Department, Blair Levin, an analyst with New Street Research, said in a note on Tuesday.

House Democrats, led by freshman congresswoman Rashida Tlaib of MI, followed suit shortly thereafter by sending a similar letter to Pai and Department of Justice head Makan Delrahim outlining their opposition to the deal, stressing how it would "disproportionately hurt lower-income people and communities of color". The states "have a relatively straightforward case with significant antitrust precedent on their side".

T-Mobile and Sprint did not immediately respond to a CNET request for comment.

Shares of Sprint dropped 6.2% to $6.56 while T-Mobile was down 1.4% at $75.28.

The lawsuit [PDF] follows a statement last month by Ajit Pai, the chairman of the Federal Communications Commission (FCC), in which he said he was planning to approve the $26bn merger thanks to new "commitments" made by the two companies about 5G deployment and rural wireless access. However, staff in the Department of Justice's antitrust division have recommended that the agency block it.

The states are acting independently from DOJ, James said, and conducted a year-long investigation prior to filing the suit.

"To many upstate New Yorkers, (the carriers) still struggle with 3G", she said, adding that there is nothing in the merger that will guarantee more towers and coverage for certain communities. But it does show that the state AGs are taking the issue seriously, and we can expect a serious fight over the merger approval.

Perhaps most famously, in 1998 attorneys general from 20 states and the District of Columbia filed a joint civil action against Microsoft claiming that the software maker had sought to exploit its dominance in desktop computers to stifle competition.

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