State attorneys general team up in push to stop T-Mobile/Sprint merger

New York State Attorney General Letitia James speaks at a news conference in New York

A group of state attorneys general led by NY and California filed a federal lawsuit Tuesday to block T-Mobile's $26.5 billion bid for Sprint, citing consumer harm.

New York Attorney General Letitia James said in a statement that combining the two companies would reduce access to affordable, reliable wireless service nationwide and would particularly affect lower-income and minority communities in New York and other urban areas.

The state attorneys general said the promised benefits, such as better networks in rural areas and faster service overall, can not be verified, while eliminating a major wireless company will immediately harm consumers by reducing competition and driving up prices for cellphone service. In addition to California and New York, Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin have joined the complaint, which was filed in Federal District Court in Manhattan. State attorneys general often participate in lawsuits aimed at stopping mergers but rarely go it alone.

The attorneys general said that the companies have yet to "provide plans to build any new cell sites in areas that would not otherwise be served by either T-Mobile or Sprint". "In fact, the executives at T-Mobile and Sprint are hell-bent on closing this deal because they themselves will personally benefit from financial incentives like stock options and compensation to close the deal".

Amanda Wait, an antitrust lawyer and former Federal Trade Commission lawyer, said states could be suing if they expect the Justice Department to come to a different conclusion than they have reached. The lawsuit was filed in U.S. District Court in NY.

James also said her office did not notify Justice before the states filed the lawsuit, adding it was not required for them to do so.

The two companies have been in regular contact with regulators as they lobby for approval. The FCC has gotten on board with the merger, but the Justice Department's Antitrust division is reportedly unhappy with the deal as it now stands.

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Shares of Sprint dropped 6.2% to $6.56 while T-Mobile was down 1.4% at $75.28. The Republican chairman of the Federal Communications Commission supports the deal.

That was enough for FCC Chairman Ajit Pai to back the deal. They have also indicated they were considering divesting wireless spectrum.

But public-interest advocates said these conditions did not address the deal's main criticisms - higher prices in the long run and less wireless competition- and would be hard for regulators to enforce. Consumer advocacy groups have voiced their disagreement with the deal. It's unclear how Justice Department antitrust chief Makan Delrahim will decide, but the antitrust division staff has reportedly recommended that the merger be blocked. Direct competition between Sprint and T-Mobile has led to lower prices, higher quality service, and more features for consumers.

Since being announced a year ago, T-Mobile's push to merge with Sprint has been met with strong government pushback over concerns it would harm competition.

Perhaps most famously, in 1998 attorneys general from 20 states and the District of Columbia filed a joint civil action against Microsoft claiming that the software maker had sought to exploit its dominance in desktop computers to stifle competition.

T-Mobile now has more than 79 million subscribers and is a majority-owned subsidiary of Deutsche Telekom AG.

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