Sprint sues to block AT&T’s merger with T-Mobile

by Phil Hornshaw

Sprint has taken its fight to stop the $39 billion merger between AT&T and T-Mobile to court, suing to prevent the deal under U.S. antitrust laws.

The move isn’t too outside the norm, according to a story from GigaOM, but it does have Sprint throwing its hat into the ring alongside the Department of Justice in a bid to stop No. 2 cellular provider AT&T from absorbing the No. 4 carrier and becoming a third bigger than current No. 1 Verizon, and twice as big as Sprint. Under Section 7 of the Clayton Antitrust Act, companies can sue to stop the mergers of other companies when they feel that such deals would hamper fair competition.

Ideally, Sprint’s move will put its perspective on the merger in front of the same judge, and at the same time, as the DOJ lawsuit, effectively allowing the two parties to combine forces in court against AT&T. Sprint has been vehemently opposed to the merger, saying it will stop the ability of the company to innovate and to compete effectively.

Last week, the Department of Justice took a similar stance, claiming that AT&T’s merger would create an environment that would stifle competition among cellphone carriers, effectively resulting in a duopoly. For its part, AT&T has claimed that it needs to add T-Mobile to make it possible to spread its network coverage to 97 percent of the country, but the DOJ doesn’t buy that argument and says it doesn’t think AT&T needs T-Mobile to make network expansion happen.

In its own release following the DOJ lawsuit, AT&T said “the facts will prevail in court.”

In attempts to bolster its position, Sprint recently commissioned a study to break down another of AT&T’s claims – that the merger will create jobs. Sprint’s study’s findings claim that the AT&T merger will only create jobs if the investments made by AT&T are greater than those that would have been made by AT&T and T-Mobile anyway, which is basically an unanswerable question. AT&T shot back by calling the study flawed and “ridiculous,” because Deutsche Telekom, T-Mobile’s parent company, has already announced it wouldn’t be pumping any more money into the ailing cellular provider. Assuming the AT&T investment of $8 billion would be matched by AT&T and T-Mobile together also assumes that T-Mobile will be investing quite a bit of money without the merger.

Long story short, Sprint is very worried about the AT&T deal and it plans to do everything it can to throw a wrench into the gears. As it stands, AT&T might have trouble getting the deal through court, but the DOJ hasn’t shut the door on the possibility of AT&T changing the deal with T-Mobile to get the merger through. Basically, everything is up in the air, but at least some people (corporations and consumers alike) are adamant that the deal is bad news.

How the whole story shakes out now is likely to be decided in front of a judge.