MANHATTAN (CN) – The antitrust trial over a contentious $26.5 billion mega-merger of telecommunication giants T-Mobile and Sprint kicked off Monday with witness testimony after a federal judge bypassed opening statements.
Critics say that the merger of the country’s third- and fourth-largest mobile wireless companies would raise prices for consumers, particularly those in rural areas who already struggle with access to high-speed internet.
While an earlier proposed merger between the two companies fell apart in 2014 due to concerns that Obama-era antitrust regulators would block the deal, T-Mobile and Sprint's current proposal has already passed several federal regulatory hurdles in the Trump administration.
Federal Communications Commission Chairman Ajit Pai gave his approval for the deal in May, and the Justice Department gave a green light for the proposed merger this summer, with the stipulation that Sprint would divest its prepaid services, including Boost Mobile and Virgin Mobile, to the satellite television company Dish Network.
The $26.5 billion merger now faces a bench trial in Manhattan where a coalition of states say shrinking the big-four major wireless carriers down to three would result in higher prices for wireless customers, particularly for users of prepaid plans.
In addition to New York and California, 11 other states and the District of Columbia have joined the challenge.
T-Mobile for its part insists that by merging with Sprint, the wireless carrier could reduce costs and lower prices for consumers.
U.S. District Judge Victor Marrero, a Clinton appointee, opted to dispense with opening statements Monday, kicking off what is expected to be a two-week trial
ending during the Christmas holiday week.
Calling their first witnesses, the states questioned Roger Solé, a Sprint chief marketing officer over fledgling results from the company’s unlimited wireless plan marketing.
The trial is expected to include testimony from other executives including T-Mobile President Mike Seivert who will succeed departing CEO John Legere next year; Marcelo Claure, the executive chairman of the board of Sprint Corp.; and Tim Hoettges, chairman and chief executive of Deutsche Telekom, the German-based telecom group that indirectly holds more than 60% of T-Mobile’s stock.
The companies have previously promised to build out 5G high-speed internet and expand rural broadband, but now they are affixing timelines and agreeing to pay penalties if they fail to meet their commitments.
As part of the deal, Sprint will divest Boost Mobile, Virgin Mobile and Sprint prepaid to satellite television company Dish Network. T-Mobile and Sprint will also give Dish access to 20,000 cell sites and to T-Mobile’s network for seven years, during which time Dish will work on constructing its own brand new "supercharged" 5G network.
Dish co-founder and chairman Charlie Ergen is also expected to take the stand at trial.
Texas withdrew from the multistate antitrust lawsuit last month, following similar retreats from state attorneys general in Colorado and Mississippi, which each announced settlement deals to exit the litigation in October.
Judge Marrero once sat on the board of New York Telephone Company, which later combined with New England Telephone and Telegraph. Its successors, the now-defunct companies NYNEX and Bell Atlantic, were later swallowed up by Verizon, which now pays Marrero a pension. Marrero’s ethics counsel informed him that the money that he receives from T-Mobile and Sprint’s competitor should not pose any conflict because that income is “fixed and fully vested.”
New York Attorney General Letitia James applauded the states' case as the trial commenced Monday, saying that the merger would be "bad for consumers, bad for workers, and bad for innovation."
"We simply must protect consumers from unchecked corporate dominance and make sure competition in the marketplace yields better outcomes for cell phone customers and workers alike," she added.
California Attorney General Xavier Becerra remarked Monday: “Today we stand on the side of meaningful competition and affordable options for consumers. Our airwaves belong to the public, who are entitled to more, not less.
"This merger would hurt the most vulnerable people among us - leaving consumers with fewer choices and higher prices," Becerra continued. “We’re fighting in court with a 14-state strong coalition for them, and for all Americans, and we’re confident the law is on our side.”