Judge Hears Final Pitches on Proposed Merger of Sprint and T-Mobile

MANHATTAN (CN) – The coalition of states that sued to block T-Mobile’s planned acquisition of Sprint made their closing arguments Wednesday to convince a federal judge that the $26.5 billion merger of third- and fourth-largest U.S. wireless carriers is anticompetitive and would raise prices for consumers.

While both the Federal Communications Commission and the Justice Department have approved the merger, the fate of the telecommunications super-merger moved to U.S. District Judge Victor Marrero, who will rule on whether it is in the public interest to block the deal that a coalition of states say will make the wireless marketplace substantially less competitive.

The Justice Department gave T-Mobile and Sprint the green light to proceed on the condition that Sprint divests its prepaid wireless brands, including Boost Mobile and Virgin Mobile, to the satellite television company Dish Network.

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

In December, the future of the merger then moved to a two-week bench trial in Manhattan federal court where a coalition of states argued that shrinking the Big Four wireless carriers down to three would result in higher prices for wireless customers, particularly for rural customers and users of prepaid plans.

In addition to New York and California, 11 other states and the District of Columbia joined the challenge.

“Consumers across this country are likely to be harmed to the tune of billions of dollars,” California attorney Glenn Pomerantz said Wednesday during his closing arguments on behalf of the states.

Pomerantz revisited an issue first brought up by Judge Marrero at trial in December, when the judge pressed T-Mobile CEO John Legere to explain why the new post-merger T-Mobile wouldn’t just turn into the dominant market leaders he antagonizes, likening the self-styled un-carrier to “so-called flower children … the mavericks of the day” who sprung from 1960s counterculture and then later abandoned those principles to become investment bankers on Wall Street.

“The flower child is more likely to turn in to the investment banker,” Pomerantz reprised Wednesday, arguing that the economic incentives of new T-Mobile post-merger would more closely resemble AT&T and Verizon’s incentives than its incentives as the underdog un-carrier prior to the merger.

T-Mobile has already signaled to the big two carriers that it would likely pull its punches and coordinate with AT&T and Verizon, Pomerantz argued.

“The concern here is that when you don’t have the potential for Sprint to come in and disrupt this coordination,” Pomerantz said.

Pomerantz dismissed T-Mobile’s defense argument that Sprint is a weakened competitor, calling it “the Hail-Mary pass of presumptively doomed mergers.”

Pomerantz said Dish’s new operations as mobile virtual network operator would pale in comparison to what Sprint offered as the number 4 competitor.

David Gelfand, a lawyer for T-Mobile, insisted during his closing summation that it was unlikely that market would become substantially less competitive if the merger goes through.

“The world with the merger holds tremendous promise,” Gelfand said, while a world without the merger would be a loss for U.S. consumers who won’t benefit from a supercharged national network and lower prices from competition against Verizon and AT&T.

Without the merger Sprint would continue its decline as a fledgling and ineffective competitor, facing increasing turnover of customers and a high debt burden, Gelfand argued Wednesday.

Dispensing with the aforementioned “flower child” analogy, Gelfand chose a different cultural reference point for T-Mobile: “Rocky,” the iconic franchise of boxing movies from the 1970s and 1980s. He argued the supercharged new T-Mobile would be “developing a new punch through this merger” and bringing new competition against the big two carriers.

Gelfand said the new network would offer consumers twice the wireless capacity and 15 times the speed.

“It is extremely rare for transactions involving the number 3 and number 4 companies to be challenged,” Gelfand also noted.

Marrero, a Clinton appointee, reserved his decision from the bench and assured the parties Wednesday that he would “endeavor to decide as promptly as possible.”

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