A merger between four major telecom companies could be derailed by a lawsuit filed last week.
Colorado joined eight other states last week in a lawsuit to stop the proposed merger of T-Mobile and Sprint. According to the lawsuit, the merger would violate antitrust laws by eliminating competition, giving a major — or in some places majority — market share to the new T-Mobile, raise prices, decrease quality and harm low-income consumers who are reliant on mobile phones, particularly prepaid ones. The lawsuit is thought to be one of the first times a group of state attorneys general have sued to stop a merger before the relevant federal regulating bodies have stepped in.
The Federal Communications Commission has indicated that it would approve the merger, and the U.S. Department of Justice hasn’t indicated its position yet. Some national news outlets are reporting that the DOJ wants a new major carrier to be created, filling the void left by Sprint in the four major U.S. carriers, Verizon, AT&T, T-Mobile and Sprint.
The lawsuit, filed in U.S. District Court for the Southern District of New York, is led by New York and, in addition to Colorado, includes California, Connecticut, Maryland, Michigan, Mississippi, Virginia, Washington, D.C., and Wisconsin. Nevada and Iowa are also likely candidates to join the lawsuit, since both states’ attorneys general have submitted requests to the FCC to review data related to the merger.
The complaint filed by the states details how ubiquitous mobile phones have become, in part because of the competition between the four major telecom companies, which drove prices down. The complaint alleges that a 2015 document from T-Mobile parent company Deutsche Telekom AG recognizes that consolidation of U.S. telecom companies would lead to less competition and better returns for operators, but a previous attempt to merge T-Mobile and Sprint was abandoned due to antitrust concerns.
The complaint also alleges that the merger, should it go through, would make T-Mobile the largest provider in the U.S. and give it a more than 50% market share in some places, including New York City where, according to the complaint, the two companies currently “compete fiercely” by targeting each other in promotions, advertising and retail store placement.
According to data from the Colorado Public Utilities Commission, as of March 2019, T-Mobile and Sprint had a combined 1,556,042 telephone access lines in Colorado, or roughly 1.5 million customers.
The complaint alleges that merger simulations show the new T-Mobile formed through the merger would increase Sprint’s current prices, and other countries that have consolidated from four major providers to three have seen price increases between 17.2% and 20.5%.
The Colorado Department of Law issued a statement saying, “The break-up of the AT&T monopoly 35 years ago paved the way for the competition, innovation and customer choice in the telecommunications market that we all enjoy today.
The $26 billion merger of T-Mobile and Sprint would reduce competition in retail mobile wireless services and the prices that Colorado consumers pay for those services. Particularly hard hit would be prepaid customers. Many of these customers come from low-income households and their mobile handsets are their primary — or even only — means of connecting to the internet.
The complaint also details how the four biggest carriers in the U.S. — Verizon, AT&T, T-Mobile and Sprint — compete for geographic areas with technology such as the nationwide 5G rollout.
Sprint and T-Mobile are currently targeting different cities, showing how the companies currently compete in technology.
“To protect Colorado consumers, and the benefits that come from competition, the court should block this merger,” the Colorado Department of Law statement read.
The complaint was filed under Section 16 of the Clayton Act to prevent the defendants from violating Section 7 of the Clayton Act, which prohibits mergers or acquisitions to lessen competition or create a monopoly.
The complaint alleges the merger would eliminate competition between T-Mobile and Sprint, substantially lessen competition between the remaining three major carriers, increase prices, decrease quality and reduce innovation.
— Tony Flesor, [email protected]