Sprint Asks Court to Enjoin AT&T/T-Mobile Transaction

Sprint called the deal “brazenly anticompetitive” and a “classic violation” on antitrust law, in its 68-page pleading. “In one fell swoop, AT&T’s proposed purchase would eliminate one of four national competitors and marginalize a second (Sprint), pushing the market back toward a 1980s-style cell phone duopoly,” the pleading said. “The proposed transaction would … leave a swath of victims in its wake. United States consumers would face significantly fewer choices for national service with full access to broadband data services and iconic handsets. Business customers would also suffer increased prices and reduced innovation."

An AT&T spokesman said in reply the deal would mean more jobs for Americans and expanded deployment of LTE. “This simply demonstrates what we've said all along -- Sprint is more interested in protecting itself than it is in promoting competition that benefits consumers,” he said. “We of course will vigorously contest this matter in court.”

"The Supreme Court has been extremely skeptical of competitors seeking to block mergers on the grounds that ‘competition’ will suffer as a result of the merger,” said lawyer Jonathan Lee, an antitrust expert who does some work for AT&T. He said similar suits to the one filed by Sprint have never been successful.

Free Press Research Director Derek Turner said it’s not surprising a third party would file a legal challenge. “This is an open and shut case, based on AT&T’s own facts and figures,” he said. “The Department of Justice has all the evidence it needs to block this job-killing merger, and we expect the courts will quickly agree.” The Rural Telecommunications Group said it agreed with Sprint that removing T-Mobile “from the mobile wireless marketplace is thoroughly anticompetitive, a blatant violation of Section 7 of the Clayton Act.”

Goodlatte, chairman of the House Judiciary Subcommittee on the Internet, meanwhile said a federal court must carefully weigh DOJ’s challenge. “Our Subcommittee performed its duty in conducting an impartial, robust hearing for Congress and the public to examine the many issues the proposed merger presents,” he said. “It is important for the court to similarly base any decision completely on the facts."

Deutsche Telekom is determined to fight the DOJ lawsuit, a spokesman said. Together with AT&T, “we shall seek an expedited hearing and defend the merger against the lawsuit filed by the DOJ,” he said. “We will also be pursuing a negotiated solution, consistent with what the DOJ said publicly.” Media reports on AT&T’s ability to walk away from the transaction and not pay the breakup fee if the cost of conditions requested by the government exceeds $7.8 billion aren’t true, he said. The breakup fee was agreed to address a number of possibilities, including failure to win support from regulators, the spokesman said.

"AT&T clearly believes that they are, indeed, on the hook for the breakup fee,” Bernstein analyst Craig Moffett said, based on conversations with AT&T officials as recently as Monday morning. It would be very hard for the DOJ to settle with AT&T “without appearing to have capitulated” despite assurances from AT&T that the door is still open, he said.

AT&T doesn’t have much to lose by going to court, and “they do have a fighting chance of prevailing,” said MF Global analyst Paul Gallant. Given the big breakup fee, it seems inevitable that AT&T will first try to figure out how much a settlement would cost, he said.