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Sprint Sues To Block AT&T’s Buyout Of T-Mobile

September 7, 2011

 

Sprint Nextel Corp. sued to block AT&T Inc.’s $39 billion acquisition of T-Mobile USA, filing its own private antitrust claims alongside the U.S. Department of Justice´s challenge to the deal.

Sprint, the nation´s third largest wireless carrier, has long opposed the buyout, saying the combination of AT&T and T-Mobile would lead to duopoly between AT&T and Verizon Communications that would ultimately mean higher prices for consumers.

“AT&T’s proposed takeover of T-Mobile is brazenly anticompetitive,” said Sprint in court papers filed on Tuesday.

“By acquiring T-Mobile, AT&T would be removing a low-price and innovative maverick competitor that provides particularly disruptive competition,” Sprint said.

The company said it would be marginalized by acquisition, and that the proposed deal “would force consumers to endure higher prices and be denied the fruits of vigorous innovation.”

“The injuries to Sprint and the public at large would be irreparable if the merger were completed.”

In a statement, a spokesperson for AT&T said the company would contest lawsuit.

“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,” said the spokesperson.

Sprint´s lawsuit creates a potential obstacle to AT&T’s efforts to either reach a settlement with the government or win a court victory to complete the deal.

The suit was assigned to Judge Ellen Segal Huvelle in Washington, D.C., who was randomly selected last week to preside over the Justice Department’s case.

Whether Sprint succeeds in its lawsuit may ultimately depend upon whether AT&T can appease the Justice Department´s concerns over the deal.

It would be a “very uphill climb” for a competitor to block a merger that has been approved by the government, said Rebecca Arbogast, an analyst with Stifel Nicolaus and a former division chief at the Federal Communications Commission, during an interview with Reuters.

“It’s meant to keep a challenge alive even if DOJ ends up settling with AT&T,” she said.

The Justice Department filed its lawsuit challenging the AT&T deal last week, five months after the deal was announced, in a move that some found surprising.  The department argued that eliminating T-Mobile as a competitor would harm consumers through higher prices.

AT&T has pledged to fight the Justice Department in court, saying the merger would allow the company to add capacity to meet growing demand for high-speed wireless services.

Judge Huvelle ordered a status conference for September 21 in the government’s case, and told all parties to come prepared to “discuss the prospects for settlement,” according to the court docket. She also ordered those involved to propose a schedule for the case by September 16.

Sprint argues in its 68-page lawsuit that if the AT&T/T-Mobile buyout goes through, the combined company would use its larger market position to exclude competitors.

A significant part of Sprint’s concern is its dependence upon Verizon and AT&T roaming to provide service to customers when they are outside of a Sprint service area, and backhaul services, which link remote sites to central sites.

“With today’s legal action, we … expect to contribute our expertise and resources in proving that the proposed transaction is illegal,” said Sprint’s vice president of litigation, Susan Haller, in a statement.

Should AT&T fails to secure regulatory approval for the acquisition, it will have to pay T-Mobile parent Deutsche Telekom an estimated $6 billion break-up fee.

The case filed by Sprint is: Sprint Nextel Corp. v. AT&T Inc., U.S. District Court for the District of Columbia.

The U.S. case is: USA v. AT&T Inc. et al, U.S. District Court for the District of Columbia, No. 11-1560.

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Source: RedOrbit Staff & Wire Reports



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