Sprint files suit to block AT&T's T-Mobile merger

Opposition is building against the deal that Sprint and other critics say would create a wireless "duopoly" and spell bad news for consumers.

Add Sprint to the list of big names choosing to speak now rather than hold their peace on AT&T and T-Mobile's dreams of corporate matrimony.

Saying it would violate the Clayton Anti-Trust Act, Sprint today filed a lawsuit opposing the deal before the same Washington, D.C.-based federal judge who received a related suit filed last week by the Department of Justice.

"Sprint opposes AT&T's proposed takeover of T-Mobile," said Sprint Vice President of Litigation Susan Haller in a statement. "With today's legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal."

In a copy of the complaint obtained by CNET, Sprint claims that "AT&T's proposed takeover of T-Mobile is brazenly anti-competitive. In one fell swoop, AT&T's proposed purchase would eliminate one of four national competitors and marginalize a second (Sprint), pushing the market back toward a 1980s-style cell phone duopoly that would force consumers to endure higher prices and be denied the fruits of vigorous innovation."

"Verizon, AT&T's most significant competitor post-merger, would not have the incentive to constrain AT&T, and would have a substantially increased incentive to coordinate with AT&T rather than compete."
--Sprint in today's complaint

Sprint claims that AT&T's $39 billion deal to acquire T-Mobile from Deutsche Telekom would also lead to "higher prices" and harm Sprint and other small wireless carriers because a much bigger AT&T would have increased "control over backhaul, roaming and spectrum, and its increased market position to exclude competitors, raise their costs, restrict their access to handsets, damage their businesses and ultimately to lessen competition."

AT&T has argued that the deal will mean more efficient and improved services, particularly in rural America, and the company also pledged to bring 5,000 call center jobs back to the United States if the acquisition goes through. If it doesn't, AT&T could still have to pony up a $3 billion kill fee to T-Mobile.

In response to Sprint's suit, an AT&T spokesman today said it demonstrates what AT&T has been saying all along. "Sprint is more interested in protecting itself than it is in promoting competition that benefits consumers."

The spokesman added that AT&T "will vigorously contest this matter in court as AT&T's merger with T-Mobile USA will: help solve our nation's spectrum exhaust situation and improve wireless service for millions; allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans, or 97 percent of the population; and result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most."

Sprint, however, argues in the suit that the deal would essentially neuter the entire wireless market, not only by marginalizing Sprint itself, but also by removing T-Mobile, which it calls "a low price and innovative maverick competitor that provides particularly disruptive competition in the marketplace."

The complaint goes on to posit a new possible consequence of the acquisition with regards to its impact on Verizon, currently the largest wireless carrier in the U.S.: "Verizon, AT&T's most significant competitor post-merger, would not have the incentive to constrain AT&T, and would have a substantially increased incentive to coordinate with AT&T rather than compete."

Related stories
• Justice Dept. to block AT&T's T-Mobile deal
• AT&T and T-Mobile: Wireless megamerger (roundup)
• Deutsche Telekom: We are entitled to a breakup fee

Sprint also suggests that removing T-Mobile from the market would "entrench AT&T and Verizon's market power over backhaul...and significantly raise the cost of of access to backhaul services for Sprint and all other carriers."

Backhaul in this context refers to the use of wireline networks to forward calls and data between cell towers. Sprint is arguing that because both AT&T and Verizon also run wired telecom businesses, they'll be able to use that influence to squeeze wireless carriers, especially Sprint.

As mentioned above, the Department of Justice filed suit last week in an attempt to stop the deal. Also the FCC's chairman has also expressed his opposition to the deal, putting another potential hurdle in AT&T's path if it does manage to get by the DOJ and Sprint's legal actions.

See the full text of Sprint's complaint below:

Sprint complaint against AT&T's T-mobile acquisition

This post was updated at 11:21 a.m. PT with more details and a copy of the lawsuit and at 1:05 p.m. PT with a statement from AT&T.

 

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