Even More States Pile On to Oppose T-Mobile and Sprint Merger
Earlier this month, 10 state attorneys general filed a lawsuit seeking to block T-Mobile's (NASDAQ: TMUS) proposed megamerger with smaller rival Sprint (NYSE: S), a $26.5 billion deal announced early last year. The merger was always destined to face strong pushback, as reducing the number of national wireless carriers from four to three has considerable negative implications for competition.
More states have just piled on to oppose the merger.
T-Mobile CEO John Legere and Sprint Executive Chairman Marcelo Claure. Image source: T-Mobile.
14 state attorneys general are against the deal
New York Attorney General Letitia James announced today that four additional states have joined the effort to block the deal: Hawaii, Massachusetts, Nevada, and Minnesota. The original complaint estimated that the deal could end up costing T-Mobile and Sprint customers an extra $4.5 billion per year.
"The merger of T-Mobile and Sprint would stifle competition, cut jobs, and harm vulnerable consumers from across the country, so unity among the states will be key in defending our citizens against this power-hungry corporate union," James said in a statement. "We welcome the support from these four additional states, which should serve as a reminder that, all throughout the nation, we have much to lose if we do not take action to protect our people from this megamerger."
Massachusetts Attorney General Maura Healey said that after a yearlong investigation, her office concluded that the deal would "give the new company the power to raise prices, significantly reduce competition for customers, lower quality, and cost thousands of retail workers their jobs." Minnesota Attorney General Keith Ellison and Nevada Attorney General Aaron Ford echoed those sentiments, saying that it is their job to protect consumers in their respective states.
Waiting for a curve ball
The Department of Justice's antitrust division still has yet to make a formal call on the proposed merger. T-Mobile and Sprint are reportedly working with the DOJ to make concessions to secure approval.
The companies may potentially divest subsidiaries and wireless spectrum to DISH Network, and if those talks fall through, then T-Mobile is ready to auction off Sprint's Boost Mobile subsidiary, Reuters reported this week. T-Mobile and Sprint had previously agreed to divest Boost Mobile in order to get the FCC's blessing, since T-Mobile already has the largest prepaid customer base in the U.S.
The states don't think the Boost Mobile divestiture would be sufficient to address anticompetitive concerns, either. "If Boost Mobile were divested and operated as a [mobile virtual network operator] on the New T-Mobile network, the divestiture would not offset or limit the increase in concentration that will result from the Merger," the prosecutors wrote. The same would be true even if Boost Mobile were to operate on one of the other national networks, the attorneys general argued.
DOJ's pending decision is a bit of a curve ball that could affect the states' suit. The judge overseeing the case, U.S. District Judge Victor Marrero, said that call could impact the case, according to Reuters. "The elephant not in the room is the Justice Department," Marrero said. "Either way, it is likely to affect what is on the table."
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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.
