California attorney general joins lawsuit to block T-Mobile-Sprint deal, likely delays it indefinitely

by Steve Blum • , , , ,

Tmobile san francisco 18may2019

T-Mobile’s proposed merger with Sprint is “presumptively anticompetitive” according to California attorney general Xavier Becerra and eight other state attorneys general (plus their counterpart in the District of Columbia). On Tuesday, they sued the companies in a New York-based federal court with the goal of blocking the deal. The ten – all democrats – say there would be substantial damage to the market for mobile telecoms services if it goes through…

Sprint and T-Mobile are close competitors. Direct competition between Sprint and T-Mobile has led to lower prices, higher quality service, and more features for consumers. If consummated, the merger will eliminate the competition between Sprint and T-Mobile and will increase the ability of the three remaining MNOs to coordinate on pricing. The new combined company will also have reduced incentives to engage in innovative strategies to attract and retain customers compared to Sprint and T-Mobile today…The cumulative effect of this merger, therefore, will be to decrease competition in the retail mobile wireless telecommunications services market and increase prices that consumers pay for mobile wireless telecommunications services.

According to several news reports, the move is unusual because state AGs usually coordinate with the federal justice department. Staff attorneys there reportedly want to block it, but the republican-appointed head of the anti-trust unit is on the fence. The lawsuit could delay the merger for months or even years.

One likely side effect is that the California Public Utilities Commission’s review of the merger will be further delayed, perhaps indefinitely. Under some circumstances, when reviewing mergers California law requires the CPUC to “request an advisory opinion from the attorney general regarding whether competition will be adversely affected and what mitigation measures could be adopted to avoid this result”. Since the lawsuit asks that T-Mobile and Sprint “be permanently enjoined from and restrained from carrying out the merger”, Becerra won’t be suggesting mitigation measures until the case is either decided by the court, or a settlement is negotiated. T-Mobile has argued that the particular circumstance involved – annual California revenue of half a billion dollars or more – doesn’t apply in this case, but so far hasn’t prevailed.