Nine states and the District of Columbia filed a lawsuit Tuesday to block the proposed merger of T-Mobile and Sprint, believing that the combination of the country’s third- and fourth-largest wireless carriers would threaten competition and harm consumers.
The lawsuit, led by the attorneys general of New York and California, represents a major legal and political headache that could upend the $26 billion telecom tie-up, which also has divided federal regulators in Washington who must bless the deal in order for it to proceed.
“When it comes to corporate power, bigger isn’t always better,” said New York Attorney General Letitia James.
In bringing their case, the 10 attorneys general argued that T-Mobile, which is operated by Germany’s Deutsche Telekom, and Sprint, which is owned by the Japanese conglomerate SoftBank, would have incentive to raise prices and reduce service quality if they’re allowed to merge. While the two companies long have said that their combination would help them deploy next-generation wireless services, known as 5G, the states questioned if the two carriers could actually live up to their commitments to deliver better mobile broadband nationwide.
Attorneys general from New York, California, Colorado, Connecticut, the District of Columbia, Maryland, Michgian, Mississippi, Virginia and Wisconsin filed the lawsuit in federal court in New York.
“Direct competition between Sprint and T-Mobile has led to lower prices, higher quality service, and more features for consumers,” they wrote in their complaint.
“The cumulative effect of this merger, therefore, will be to decrease competition in the retail mobile wireless telecommunications services market and increase prices that consumers pay for mobile wireless telecommunications services,” the attorneys general continued.
Spokespeople for Sprint and T-Mobile did not respond to requests for comment. Shares of Sprint were down more than 5% in early afternoon trading, while T-Mobile’s stock was down about 1.5%.
In Washington, regulators at the Federal Communications Commission – which have reviewed the transaction to determine if it’s in the public interest – appear on track to approve the deal. FCC Chairman Ajit Pai offered his early blessings last month, along with the support of the commission’s two other Republican members, setting it up to clear an agency vote as soon as July.
But officials at the Justice Department – who are reviewing the T-Mobile and Sprint deal on antitrust grounds – have expressed hesitation. Staff at the DOJ’s top competition division previously had recommended the agency sue to block the merger, people familiar with the matter told The Post, though the recommendation came in the days before Sprint and T-Mobile offered new concessions to sweeten the deal with regulators. The companies offered to preserve some prices and rate plans and divest Sprint’s prepaid phone business, called Boost Mobile, to a third party.
On Tuesday, the deal’s leading critics called on the Justice Department to join state attorneys general in challenging Sprint and T-Mobile in court.
“The record is clear that it will lead to higher prices and less competition and that the companies’ promises are speculative, not merger-specific and unenforceable,” said Gigi Sohn, a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy, in a statement.