Sprint Nextel filed suit on Monday against AT&T, AT&T Mobility, Deutsche Telekom, and T-Mobile to block the proposed $39 billion merger, saying it would harm retail consumers and corporate customers by raising prices and hurting innovation.
“Sprint opposes AT&T’s proposed takeover of T-Mobile,” said Susan Haller, vice president of litigation at Sprint. “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.”
The Justice Department filed suit against the proposed merger last month, also saying it would harm competition by creating a giant company that would leapfrog to first place ahead of Verizon and leave just three big companies in charge of most U.S. telecommunications—AT&T, Verizon, and Sprint.
The case adds one more hurdle for AT&T and T-Mobile to clear before they could potentially operate as a single entity, according to Cathy Sloan, vice president for government relations at the Computer & Communications Industry Association, which includes Sprint and also strongly opposes the merger.
No matter what happens in the Justice Department's case, the company will still have to face down a judge in the Sprint case. It could be seen as a "backstop" for stopping the deal the Justice Department decides to settle, according to Sloan, who sees it as highly unlikely that DoJ would choose to settle.
"It's sort of an extra effort to cross the t's and dot the i's. Sprint from the beginning hired excellent antitrust counsel, so why not use them?" Sloan said.
If that judge sided with AT&T in DoJ case, AT&T would still have to win the Sprint case. Should AT&T win that case, the merger finally gets less contestable: private parties would have a much harder time bringing a private suit against the deal on antitrust grounds because it would be seen by the courts as already decided, Sloan said.
Harold Feld, the legal director for merger opponent Public Knowledge, said the lawsuit allows Sprint to take a more active role in the litigation instead of merely opposing the deal from the sidelines.
“It also sends a signal to AT&T about the futility of trying to force a settlement through its lobbying efforts,” Feld said by email. “Even if AT&T were successful in getting a settlement out of Justice, Sprint would continue the litigation as a party.”
Free Press Research Director Derek Turner said in a statement that it is not surprising that Sprint would make this move. “This is an open and shut case, based on AT&T’s own facts and figures,” said Turner, whose group also opposes the deal. “The Department of Justice has all the evidence it needs to block this job-killing merger, and we expect the courts will quickly agree.”
Jeffrey Silva, senior policy director for telecom at Medley Global Advisors, said the lawsuit may reflect a concern from Sprint that the Justice Department will settle the case with AT&T.
“My sense is that the Sprint suit is an attempt to put more pressure on the Justice Department with regard to the lawsuit to block the merger,” he said. “Sprint might want to put more pressure if it has any fears that DoJ might yet settle with AT&T.”
This article appears in the September 6, 2011 edition of National Journal Daily PM Update.