Courtroom battle begins over proposed US wireless mega-merger

The fate of the proposed $26bn mega-merger between the United States‘ wireless carriers T-Mobil and Sprint hangs in the balance of a courtroom battle that got under way on Monday in Manhattan federal court.

Lawyers for 13 US states and the District of Columbia are seeking to prove that a plan to combine the nation’s third and fourth-largest wireless carriers would push up prices for consumers, particularly for those who use prepaid plans.

The state officials, all Democrats, asked Judge Victor Marrero to order the companies to abandon the deal.

They began their case by calling Sprint chief marketing officer Roger Sole to testify.

The companies argue that the stronger T-Mobile that would result from the proposed $26.5bn takeover would be better able to innovate and compete to push down wireless prices.

The case represents a break with the usual process of states coordinating with the federal government in reviewing mergers, and generally coming to a joint conclusion.

This deal had been contemplated in 2014 during the Democratic Obama administration but enforcers at the Justice Department and Federal Communications Commission urged the companies to drop the idea, which they did.

Fast forward to 2019, and the Republican Trump administration signed off on the planned merger after the companies agreed to sell Sprint’s prepaid businesses popular with people with poor credit to satellite television company Dish Network Corp.

T-Mobile CEO John Legere, who steps down in April, last month acknowledged talks with Sprint to extend the merger agreement and did not rule out lowering the $26.5bn price that was originally agreed upon.

The states argue the merger would leave just three nationwide wireless carriers, Verizon Communications, AT&T and the new T-Mobile, which could lead to higher prices.

“These higher prices would fall hardest on the credit-challenged and low-income consumers who have benefited the most from the competition between Sprint and T-Mobile,” they said in a court filing.

Setting up satellite company DISH as a wireless carrier is “patently insufficient to mitigate the merger’s competitive harm”, they argued in the court filing.

In a pretrial filing by the companies, they said the stronger, merged firm will be better positioned to compete with AT&T and Verizon as the world moves to the next generation of wireless, or 5G.

“Prices will go down, not up, as a result of the merger,” the companies argued in their filing, saying the deal would create $40bn in efficiencies.