T-Mobile/Sprint on trial by US states to block merger

13 states and the District of Columbia have joined forces in an attempt to block the acquisition of Sprint by T-Mobile with the claim that it will raise prices particularly those of users with prepaid plans.

The two companies say that will not happen with a stronger T-Mobile after the merger, rather it will give T-Mobile a stronger ability to compete with the likes of Verizon and AT&T. 

Arguments by US attorneys general being led by New York and California representing both sides of the issue will be presented in opening arguments today in order to stop the deal from going through. This trial will highlight disagreements between federal antitrust enforcers who are both Republican and Democrats in powerful states.

Both companies argue that the proposes $26.5 billion takeover of Sprint by T-Mobile will allow T-Mobile to better innovate and compete and the push down wireless prices in the overall market and that it will be good for all users.

This case going to court is a break from the usual procedure of states coordinating with the federal government in reviewing mergers and coming together in a joint conclusion.

The merger was first contemplated during the Democratic Obama administration back in 2014, but Justice Department enforcers and the Federal Communications Commission persuaded both companies to drop the idea of the merger which they subsequently did.

Fast forward to today, where both companies have agreed that Sprint would sell its prepaid wireless monthly services, which has been popular with people with poor credit, to Dish Network, a satellite television company, and the Trump administration already signing off on the merger of the two companies.

The 13 states are arguing that the merger would leave just three national wireless carriers which would be Verizon, and AT&T and the newly formed T-Mobile and lead to higher prices. They claim in their court filings that not only will the merger lead to higher prices but it will have a negative effect and be hardest on those customers who are credit-challenged and with low-income consumers who have depended on the competition between Sprint and T-Mobile.

The states’ court ruling further argues that setting up DISH as a wireless company is not going to make the harm caused from the merging of the two companies any less so.

T-Mobile and Sprint say that the outcome of the merger will be a stronger company which will then be able to compete with Verizon and AT&T especially as the world moves into 5G, the next generation of wireless communication, moving prices downward not up and create $40 billion in efficiencies.