Sprint sues to block AT&T, T-Mobile merger

Reuters

Sprint Nextel (Overland Park, Kan., U.S.A) sued to stop AT&T Inc's (Dallas, Texas, U.S.A.) $39 billion purchase of T-Mobile USA (Bonn, Germany), staking out its own private antitrust claims alongside the U.S. government's challenge to the deal.

Sprint may have filed its own case in the event that the Justice Department comes to a settlement with AT&T, said Eleanor Fox, a professor at New York University School of Law.

"It may want to have its action out there just in case," she said.

Sprint, the third largest U.S. wireless carrier, filed its lawsuit in the same federal court that is to hear the U.S. Department of Justice's (DOJ) case opposing the buyout. A fierce opponent of the deal, Sprint said the combination would lead to higher prices for consumers and create a duopoly between AT&T and Verizon Communications.

"AT&T's proposed takeover of T-Mobile is brazenly anticompetitive," Sprint said in court papers on Tuesday. Sprint said it would be marginalized by the buyout, and the deal "would force consumers to endure higher prices and be denied the fruits of vigorous innovation."

A Sprint spokesman was not immediately available for comment. A spokeswoman for the Justice Department declined to comment on Sprint's move.

In a statement, an AT&T spokesperson said the company would contest Sprint's lawsuit.

"This simply demonstrates what we've said all along -- Sprint is more interested in protecting itself than it is in promoting competition that benefits consumers," said the spokesperson.

Sprint's lawsuit was assigned to Judge Ellen Segal Huvelle in Washington, D.C. She was selected at random last week to preside over the Justice Department's case.  The success of Sprint's lawsuit may depend on whether AT&T can find a way to appease the government's concerns over the deal.

It would be a "very uphill climb" for a competitor to block a merger that has been approved by the government, said Rebecca Arbogast, an analyst with Stifel Nicolaus and a former division chief at the U.S. Federal Communications Commission (FCC).

"It's meant to keep a challenge alive even if DOJ ends up settling with AT&T, Arbogast said.

The Justice Department, in a surprise move last week, filed a lawsuit challenging the AT&T deal. It argued that eliminating T-Mobile as a competitor would hurt consumers by raising prices. The government challenge came five months after the deal was announced.

AT&T has promised to fight the Justice Department in court. It has argued that the merger would let it add capacity and meet demand for high-speed wireless service.

Judge Huvelle ordered a status conference for September 21 in the government's case and told the parties to come prepared to "discuss the prospects for settlement," according to the court docket. She also ordered the parties to propose a schedule for the case by September 16.

In its suit, Sprint argued that if the deal goes through, a combined AT&T and T-Mobile would use its increased market position to exclude competitors.  A big part of Sprint's concern, according to the company's 68-page lawsuit, is its dependence on Verizon and AT&T roaming to provide service to customers when they are outside of a Sprint service area, and backhaul, essentially links from a remote site to a central site.

"With today's legal action, we ... expect to contribute our expertise and resources in proving that the proposed transaction is illegal," Sprint's vice president of litigation Susan Haller said in a statement.

Sprint's move could be aimed at keeping pressure on the Justice Department to continue pressing its court challenge to the deal, said Jeffrey Silva, a telecommunications analyst at investment research firm Medley Global Advisors.

"Some suits start out as litigation, they go head to head, but sometimes they end up in settlement," Silva said. "Sprint would rather see this go in a linear fashion" toward blocking the deal.

If AT&T fails to get regulatory approval for the deal, it will have to pay T-Mobile parent Deutsche Telekom an estimated $6 billion break-up fee.

 (Reporting by Andrew Longstreth; additional reporting by Diane Bartz, Jasmin Melvin, Jeremy Pelofsky, Supantha Mukherjee, editing by Sayantani Ghosh, Dave Zimmerman, Bernard Orr)

 

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