States to File Antitrust Suit to Block T-Mobile Sprint Deal

(Bloomberg) – A group of states sues to block T-Mobile US Inc.'s proposed acquisition of Sprint Corp. on the antitrust basis, and puts pressure on the Ministry of Justice when a final decision is reached on the merger of the two wireless operators.

State attorneys general led by New York's letitia James are preparing to file lawsuits on Tuesday in the federal court in New York to stop an agreement they say will damage the competition and increase consumer prices by at least $ 4.5 billion a year, According to people familiar with the case.

The challenge from 10 states and the District of Columbia is a major setback for T-Mobile's and Sprint's plan to combine and take on industry leaders AT & T Inc. and Verizon Communications Inc. Last month, the carriers removed one key obstacles when they won support for their agreement by the Federal Communications Commission President.

The states, all led by Democrats, take the rare step of suing to block the $ 26.5 billion deal while the Justice Department is still considering the merger. State enforcers have the authority to go to court to block a merger even if federal officials at the Justice Department and the FCC approve it. Sprint shares fell 4.8% from 10:18 in New York trading. T-Mobile fell 1.3%.

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

The case puts pressure on Makan Delrahim, head of the Justice Department's antitrust division. He can either block the states, who say the merger, block or negotiate a means that will allow the deal to continue. Delrahim does not believe the settlement with the FCC goes far enough to resolve the competition problems of the deal and is in talks with the companies for further concessions.

What Bloomberg Intelligence Says:

T-Mobile gets its proposed $ 27 billion Procurement of Sprint past regulatory hurdles is not done, although the companies have some defense that stands a chance. The Ministry of Justice has expressed interest in the competitive potential of 5G technology and a strong competitor of AT&T and Verizon in this area. The outcome depends largely on whether the evidence supports T-Mobile's claims about future market dynamics and 5G competition.

– Jennifer Rie, Legal Analyst

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State attorneys generally say that combining T-Mobile and Sprint would eliminate competition between them and lead to higher prices that cost the two companies' subscribers around. $ 4.5 billion a year more, according to people familiar with the case. That estimate undermines the real damage, they say, because it does not include the higher prices AT&T and Verizon could upload on a more consolidated market.

In the wireless mobile phone market, not including corporate accounts, T-Mobile and Sprint would head AT&T and Verizon into market share, according to states. In some parts of the country their market share will be over 50%, they said. Tie-up injuries will disproportionately fall on lower-income consumers who are customers of Sprint and T-Mobile's prepaid brands, Boost and Metro, they say.

Deal Investigation

According to people familiar with their thinking, state officials do not know whether the Ministry of Justice will eventually approve the agreement. They act because, after examining the merger for about a year, they decided that they violated the antitrust law and did not see any reason to wait for the Justice Department to make a decision, the people said.

The state survey led by the head of New York's antitrust agency, Beau Buffier, was on technical and economic experts, according to one of the people. Their economists are Carl Shapiro of the University of California at Berkeley and Yale University's Fiona Scott Morton, said the person.

The case comes more than a year after T-Mobile and Sprint announced the deal combining and arguing that together they could better compete with Verizon and AT&T while the speed is being distributed by the next-generation wireless technology known as 5G. Although an earlier attempt to merge became frustrated by the Obama administration officials, T-Mobile and Sprint set themselves on a more receptive audience from the Trump administration.

When the case is filed, the tie's fate will rest with a federal judge, who must decide whether it should be blocked on antitrust grounds. The companies can still reach a settlement before the case goes to trial.

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