Sprint Sues to Block AT&T, T-Mobile Merger, Hopes for Consolidated Government Case

The Telecommunications Law Resource Center is the most comprehensive reference and news platform for communications law, covering broadcasting, cable, broadband, telephony and wireless;...

Sprint Nextel Corp. has filed suit in federal district court to block AT&T Inc.'s proposed acquisition of T-Mobile USA Inc., less than a week after the Department of Justice moved to halt the deal with a suit of its own.

Sprint, in a 68-page civil antitrust lawsuit filed in the U.S. District Court for the District of Columbia, said AT&T's takeover of T-Mobile would eliminate one of four national competitors and marginalize Sprint's own position in the wireless market in violation of Section 7 of the Clayton Act, which prohibits acquisitions that substantially reduce competition.

Sprint: Entrenched Control.

“The effects of AT&T's proposed acquisition would be to entrench the Twin Bells' [AT&T and Verizon Wireless] control of the wireless communications markets, injuring Sprint and making it less effective as a competitor on the merits, while simultaneously causing harm to consumers,” Sprint said in its complaint filed Sept. 6. “The injury to Sprint's business would result from, among other things, the combination of decreased attractiveness of its product offerings, increased costs, and a substantial loss of customers. Because the injury to Sprint flows directly from both the reduction in competition caused by the merger, as well as from anticompetitive acts made possible by the illegal transaction, the injury to Sprint would constitute antitrust injury.”

The proposed merger of AT&T and T-Mobile would combine the second- and fourth-largest wireless carriers in the United States, and supplant Verizon Wireless as the No. 1 carrier in the country.

AT&T and T-Mobile would together serve a combined 130 million customers nationwide, compared to Verizon's 97 million. As the nation's new No. 1 and No. 2 providers, AT&T and Verizon would control 76.2 percent of the market for post-paid wireless voice and data communications services. Even after adding net subscribers this year, Sprint Nextel Corp.—currently the No. 3 provider—ended 2010 with just 50 million subscribers.

“With today's legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal,” said Susan Haller, vice president of litigation for Sprint, in a Sept. 6 statement.

Sprint filed the suit as a related case to the DOJ's suit against the deal.

Assigned to Same Judge as DOJ Lawsuit.

The case has been assigned to U.S. District Judge Ellen Segal Huvelle, who is overseeing the government's antitrust lawsuit against the acquisition.

Huvelle has overseen a number of antitrust cases brought by regulators, most notably the Justice Department's suit to block SunGard Data Systems's $825 million bid for Comdisco's data recovery business. Huvelle ultimately ruled for SunGard, concluding that the DOJ could not prove that the proposed transaction was “reasonably likely to substantially lessen competition.”

Huvelle also presided over the DOJ's lawsuit seeking to block the UnitedHealth Group's $2.4 billion acquisition of Sierra Health Services, which resulted in a settlement.

Legal observers see Sprint's suit as an attempt to gain leverage in any settlement negotiations.

Both AT&T and the DOJ's antitrust division have been ordered to appear before Huvelle on Sept. 21 to schedule proceedings in the case. That meeting will likely delve into a possible settlement of the DOJ's suit.

In a statement responding to the suit, AT&T said Sprint is “more interested in protecting itself than it is in promoting competition that benefits consumers.”

“We of course will vigorously contest this matter in court...,” AT&T said.

Section 4 of the Clayton Act allows triple damages to “any person” who has been “injured in his business or property by reason of anything forbidden in the antitrust laws.”

By Paul Barbagallo

The complaint is available at http://op.bna.com/der.nsf/r?Open=rtar-8lfrjl .