States opposing T-Mobile/Sprint merger go for the federal government's jugular

States opposing T-Mobile/Sprint merger go for the federal government's jugular
Just in case it wasn't already abundantly clear how the DOJ and FCC felt about the $26.5 billion mega deal aiming to combine T-Mobile and Sprint's resources and subscriber numbers, the two government agencies made an official plea to a federal judge presiding over a highly publicized trial near the end of said New York lawsuit a few weeks back.

But the states that started the legal proceedings to try to block the merger between the nation's third and fourth-largest wireless service providers are hitting back ahead of closing arguments scheduled for January 15 and a verdict likely to come in sometime next month.
In a late Wednesday court filing in Manhattan, lawyers for New York and California highlighted the "inconsistent" behavior of the Federal Communications Commission and Department of Justice, which had long opposed the "consolidation" of the US wireless industry before seemingly green-lighting this particular merger with "only a cursory examination of the approval conditions."

It's worth pointing out that the NY and California state AGs are essentially leading the litigation, having an additional 11 states and the District of Columbia in their corner as they argue competition would be weakened and prices potentially increased as a consequence of the merger going through. 

That number may not sound impressive enough to take on the entire Trump administration and the deep-pocketed execs of T-Mobile parent company Deutsche Telekom, but as further emphasized in the January 8 filing, the plaintiff states are home to nearly a third of the national rural population, which nullifies the federal government's argument that possible rural benefits stemming from the merger were not considered when the legal wheels were put in motion.

The battle is far from over

Separately, the states reminded the court about several other core arguments against the deal, calling it "presumptively illegal" under antitrust law as it would give birth to a "New T-Mobile" carrier with a whopping 34 percent market share by revenue. Last but not least, Dish is once again deemed too inexperienced to take Sprint's place and provide real competition for the "big three" club expected to completely dominate the market.

Of course, T-Mo and Sprint are not taking these attacks lying down in preparation of a crucial verdict for the financial stability of both entities, calling the merger the only "realistic way" to "break the vicious cycle of poor network quality leading to subscriber losses and reduced network investment, leading to even worse network quality." In other words, the theory is both wireless service providers would be negatively impacted by a blocking of the merger in terms of network quality while also potentially needing to hike their prices

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Under an even bleaker but not altogether implausible scenario, Sprint could be forced to "retreat from nationwide service" without a cash injection from T-Mobile, which would obviously be far worse for the industry than giving Dish a chance to become a major player.

US District Judge Victor Marrero will have to decide which of the conflicting arguments makes more sense... unless some sort of a last-minute settlement will be reached. That seems highly unlikely, mind you, and most analysts are giving the states the slight edge in their predictions of how this legal drama will wrap up.

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