Ten states filed a lawsuit on Tuesday to stop T-Mobile’s $26 billion acquisition of smaller rival Sprint, warning that wireless prices will surge due to reduced competition, Reuters reported.
The complaint comes as the U.S. Justice Department is close to making a final decision on the merger, which would reduce the number of nationwide wireless carriers to three from four.
The all-Democratic attorneys general from the 10 states, including Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin, say the reduced competition would cost Sprint and T-Mobile subscribers more than $4.5 billion annually, according to the complaint.
“When it comes to corporate power, bigger is not always better,” New York Attorney General Letitia James said at a news conference.
“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.
James said the lawsuit was not filed to influence the Justice Department’s decision on the merger, adding that negotiations were ongoing among the states, the Justice Department and the carriers.
James said her office did not notify Justice before the states filed the lawsuit, adding it was not required for them to do so. State attorneys general often participate in lawsuits aimed at stopping mergers but rarely go it alone.
The complaint was filed in the U.S. District Court for the Southern District of New York.
“This is the third time T-Mobile has tried to merge and shrink the market to three players,” said California Attorney General Xavier Becerra.
“Every time they’ve tried they’ve been blocked or forced to walk away because of opposition from the government… Opposition that’s based on the same concerns laid out in our lawsuit today.”
T-Mobile, whose parent company is Germany-based Deutsche Telekom, and Sprint, controlled by Japan’s SoftBank Group, did not comment.
The T-Mobile/Sprint deal has won the backing of a majority of the FCC. The U.S. Justice Department’s antitrust division staff has recommended the agency block the deal, but no final decision has been made.
While AT&T and Verizon dominate the overall U.S. 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.
As part of their push to win regulatory approval, T-Mobile and Sprint have pledged not to raise rates for three years.
The companies have also offered to sell Boost to reduce the combined company’s market share in the prepaid business. They have also indicated they were considering divesting wireless spectrum.
The states’ complaint also said that divesting Boost would not resolve competitive concerns since Boost would be dependent on another carrier to provide network access, meaning that it is not independent.
Sprint chairman Marcelo Claure and T-Mobile CEO John Legere met with Justice Department officials on Monday.
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.
The next two big steps will be determining the position of Makan Delrahim, head of the Justice Department’s antitrust division, and the identity of the judge assigned to the states’ lawsuit, Levin wrote.