Tuesday, September 06, 2011

Sprint Files Own Antitrust Suit to Block AT&T/T-Mobile Combination

This posting was written by John W. Arden.

In the wake of the Department of Justice’s filing of an antitrust lawsuit to block AT&T Corp.’s proposed acquisition of T-Mobile USA Inc. on August 31, mobile wireless carrier Sprint Nextel brought its own antitrust action today, seeking to prohibit the acquisition as a violation of Section 7 of the Clayton Act.

Sprint filed the lawsuit against AT&T Corp., AT&T Mobility, T-Mobile USA Inc., and Deutsche Telekom (T-Mobile’s parent) in the federal district court in the District of Columbia as a related case to the Department of Justice’s lawsuit.

The suit alleged that the proposed $39 billion acquisition would harm consumers and competition in the market for mobile wireless services. Specifically, Sprint claimed that completion of the transaction would:

• Harm retail consumers and corporate customers by causing higher prices and less innovation.

• Entrench “duopoly control” by “Ma Bell” descendants AT&T and Verizon of the almost quarter of a trillion dollar wireless market.

• Injure Sprint and other independent wireless carriers.

According to Sprint, a combined AT&T and T-Mobile would control more than three-quarters of the wireless market and 90 percent of the profits. The combined companies would be able to use its control over backhaul, roaming, and spectrum and its increased market position to exclude competitors, raise their costs, restrict their access to handsets, damage their businesses, and ultimately less competition, Sprint charged.

According to last week’s Department of Justice complaint, the four nationwide providers of mobile wireless service—Verizon, AT&T, Sprint, and T-Mobile—account for more than 90 percent of the national market. T-Mobile, the smallest of the four, has historically challenged the top three competitors by providing value, innovation, and aggressive pricing.

The elimination of T-Mobile as an independent, low-priced alternative rival would therefore “remove a significant competitive force from the market” and “substantially reduce competition,” the Justice Department claimed.

On August 31, Sprint issued a statement supporting the Department of Justice lawsuit, but did not hint that it was considering filing an action of its own.

“The DOJ today delivered a decisive victory for consumers, competition and our country,” the news release said. “By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision–one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”

A news release on Sprint’s filing of today’s action appears here.

Further information about the Justice Department’s lawsuit appears here in an August 31 posting on Trade Regulation Talk.

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