The proposed merger between U.S. telecom giants Sprint Corporation and T-Mobile U.S. Inc. took a huge hit when 10 states jointly filed a lawsuit on Tuesday to stop the $26.5 billion deal.
The lawsuit filed by the attorneys-general of Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia, and Wisconsin contends consumers will be hurt by the deal by opening the door to higher prices later on. The reduced competition resulting from the merger will also cost Sprint and T-Mobile subscribers more than $4.5 billion annually.
The lawsuit was filed at the U.S. District Court for the Southern District of New York. It comes as the U.S. Department of Justice (DOJ) is close to making a final decision on the merger that will shrink the number of U.S. national wireless carriers to three from four.
The other two carriers are AT&T and Verizon Corporation, which dominate the overall U.S. wireless market. On the other hand, T-Mobile is tops among customers earning less than $75,000 per year. Sprint's Boost Mobile prepaid brand has 83 percent of its users in that income range.
"When it comes to corporate power, bigger is not always better," said New York Attorney General Letitia James about the lawsuit.
"Too many upstate New Yorkers, (the carriers) still struggle with 3G," she said.
James also said there's nothing in the merger that will guarantee more towers and coverage for certain communities.
James also said her office didn't notify DOJ before the states filed the lawsuit since it's not required they do so. State attorneys general often take part in lawsuits aimed at stopping mergers but rarely do it alone.
"This is the third time T-Mobile has tried to merge and shrink the market to three players," said California Attorney General Xavier Becerra.
"Every time they've tried they've been blocked or forced to walk away because of opposition from the government... The opposition that's based on the same concerns laid out in our lawsuit today."
It remains unclear if the DOJ will consent to the proposed merger between Sprint and T-Mobile as it's currently structured despite Ajit Pai, chairman of the U.S. Federal Communications Commission (FCC), signifying his support for the deal last month.
In mid-April, media reports said the DOJ is unlikely to approve the merger due to unspecified reasons. DOJ officials are said to have told both Sprint and T-Mobile the deal might not be approved as it now stands.
