States Sue to Stop Sprint Merger With T-Mobile

A woman using a cellphone walks past T-Mobile and Sprint stores on April 27, 2010, in New York. (AP Photo/Mark Lennihan)

(CN) – A coalition of state attorneys general took to federal court Tuesday to block a proposed $26.5 billion merger of telecommunication giants T-Mobile and Sprint.

The merger has drawn condemnation from critics who fear it could hurt consumers, particularly those in underserved, rural areas. However, Federal Communications Commission Chairman Ajit Pai, a Republican, expressed support for the deal last month.

Virginia Attorney General Mark Herring, a Democrat, is among those behind the federal lawsuit, which was filed Tuesday in Manhattan.

He said in a statement that cellphones have become a necessity for people get a job or succeed in school, and the merger would offer few benefits to consumers.

“The cost of mobile phone service has actually dropped significantly in recent years, but this proposed merger would likely lead to increased costs, fewer choices, and less innovation in the market,” Herring said. “For many families on a tight budget, a small increase in the cost of their phone plan could be incredibly disruptive and difficult to absorb.”

“We’re going to do what we can to protect Virginians and keep phone bills low,” he added.

In addition to Virginia, the 45-page complaint was filed by attorneys general in New York, California, Colorado, Connecticut, Washington, D.C., Maryland, Michigan, Mississippi and Wisconsin.

It cites a redacted portion of a 2015 Deutsche Telekom document saying “that consolidation will lead to less competition and better returns for network operators,” according to the complaint.

Deutsche Telekom AG, a German-based telecom group which the complaint says “indirectly holds approximately 63% of T-Mobile’s stock” and the Tokyo-based Softbank Group Corp, which “indirectly holds approximately 85% of Sprint’s stock” are listed as defendants alongside the two U.S. companies.

Questions sent to Herring’s office to clarify the source of the redacted document were not returned by press time.

The filing also points to a previous attempt by T-Mobile to merge with AT&T, which was dropped after challenges to its impact on competition in the U.S. market.

Chairman Pai’s support for the merger is also referenced in the filing, but it notes the FCC has yet to actually approve the deal, which is required before it could go forward due to the transfer of radio licenses involved.

The complaint asks the court to permanently enjoin the merger.

Additional concerns expressed by the attorneys general include what impact the merger could have on rural areas, which already suffer from a lack of cellphone coverage.

Carri Bennet, general counsel for the Rural Wireless Association, which tracks access to wireless services in more remote parts of the country, said the merger would be particularly bad for those in the areas they monitor. She accused the FCC of not being transparent with the public about the deal, and instead “blindly accepting New T-Mobile’s words as truth.”

Attempts to reach T-Mobile and the FCC were not returned, but public comments on the merger are available on the FCC’s website.

One comment, submitted by Andrea Rice from the Missouri Farm Bureau, argues the merger will benefit the rural consumers she represents and concerns about its negative impacts are overblown.

“Businesses and families in these rural communities rarely have the opportunity to choose from more than one or two wireless, broadband or cable providers,” reads the comment which was originally published as an op-ed in a local newspaper, The Missouri Times. “However, with the combination of T-Mobile and Sprint, the possibility of more robust competition is becoming a reality.

“Competition that will be created by having a stronger wireless company providing more rural coverage means a better product at a better price,” Rice added.

This isn’t the first legal hurdle the proposed merger has faced.

Last September, Sprint shareholders claimed in a class action suit filed in Kansas federal court that the merger was tainted by statements issued to the Securities Exchange Commission. That case, which similarly asked for a halt of the merger, was voluntarily dismissed shortly after being filed.

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