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4 more states back lawsuit to block T-Mobile-Sprint merger as trial looms

Smartphones with the logos of T-Mobile and Sprint are seen in front of a Soft Bank logo in this illustration taken September 19, 2017. REUTERS/Dado Ruvic/Illustrations

Four more U.S. states are throwing their weight behind a federal lawsuit aiming to block a mega-merger between T-Mobile (TMUS) and Sprint (S), respectively the third and fourth-largest national wireless carriers.

Hawaii, Massachusetts, Minnesota, and Nevada will join nine other states and the District of Columbia, an attorney on behalf of the state of New York, told Judge Vincent Marrero on Friday during a pretrial hearing in Manhattan.

In a lawsuit filed last week, the states argue that if permitted to merge, the consolidated company would create a monopoly that violates federal antitrust law.

“Competition has enabled mobile wireless telecommunications services to become vital to the everyday lives of all the people by driving dramatic improvements in quality and reductions in prices,” the complaint states. “The merger will negatively impact all retail mobile wireless telecommunications service subscribers but will be particularly harmful to prepaid subscribers.”

‘The transaction as it stands is pro-competitive’

For their part, Sprint and T-Mobile argue that a combined company would help the U.S. broaden its 5G wireless network. Friday’s hearing came as Sprint and T-Mobile await decisions from the Department of Justice and Federal Communications Commission, which have not officially stated whether they endorse the proposed deal.

“I understand it is still under consideration,” Judge Marrero said about the Justice Department’s pending determination, which, absent the lawsuit, would control the fate of the deal.

Marrero added that the department may or may not take a position on the case and inquired with both parties whether they believed the department would seek to be added as a party to the lawsuit.

T-Mobile US CEO John Legere checks his phone before testifying before a U.S. House Committee on Energy and Commerce Subcommittee hearing in Washington, U.S. February 13, 2019. REUTERS/Erin Scott

“The Justice Department is very unlikely to intervene in this case,” George Cary, an attorney for T-Mobile and its parent company Deutsche Telekom, said. Carey also explained that any decision from the Justice Department concerning its antitrust evaluation is unlikely to change the company’s ability to go forward with a trial.

An attorney representing New York said a proposed settlement between the mobile carriers and the Department of Justice would have a very significant impact that may require the states to amend their complaint. The states said it would be “unlikely but possible” that the Justice Department would seek to intervene in the case.

“The transaction as it stands is pro-competitive,” Carey argued.

He said the deal would allow T-Mobile and Sprint to “go head-to-head” with industry leaders, while the states contend that having more carriers is better for consumers.

“We think the competition that exists has benefitted Americans and benefitted Californians,” Paula Blizzard, an attorney on behalf of the state of California, argued.

Before the multistate lawsuit, the merger appeared to be progressing towards approval from the Department of Justice and the Federal Communications Commission. The companies had reportedly been asked by at least one of the agencies to make concessions such as divestment of Sprint’s prepaid service, Boost, as well as a portion of the radio frequencies that Sprint currently controls.

The attempted merger marks the third time T-Mobile has attempted to consolidate with a major carrier. In 2011, the company sought to merge with AT&T, and in 2014 it failed in a prior effort to combine with Sprint. A merger would make the combined new company the second-largest wireless provider in the country.

The parties told the judge they tentatively agreed to an October 7 trial date. A trial, they said, would take two to three weeks.

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Alexis Keenan is a New York-based reporter for Yahoo Finance. She previously produced and reported for CNN and is a former litigation attorney. Follow on Twitter @alexiskweed.

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