US states sue to block Sprint, T-Mobile deal

[NEW YORK] New York and California led a group of state governments in filing a lawsuit on Tuesday to block the proposed US$26 billion merger between Sprint and T-Mobile, asserting the deal would harm consumers.

Nine states and the District of Columbia, argued that allowing the companies to combine would cause "irreparable harm" leading to higher costs that would price out low-income consumers.

T-Mobile and Sprint, the third- and fourth-largest wireless carriers in the country, together have around 130 million subscribers, and the combination would bring the merged company closer to the dominant players Verizon and AT&T.

The merger "would not only cause irreparable harm ... by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities," New York Attorney General Leticia James said in a news release.

"That's why we are going to court to stop this merger and protect our consumer."

Sprint, majority owned by Japan's SoftBank, and T-Mobile, a unit of Germany's Deutsche Telekom, have said the deal is needed to compete in developing the next-generation 5G network.

The companies have agreed not to raise rates for three years and will divest from Sprint's subsidiary Boost Mobile.

But the states argue the deal would remove the lower cost carriers from the market ending the "fierce competition" that pressured AT&T and Verizon to hold down prices, according to the lawsuit filed in federal court in New York.

This would especially harm lower-income consumers, who have benefited from a 28 per cent drop in wireless service over the last decade due to competition, the states argued.

"Although T-Mobile and Sprint may be promising faster, better, and cheaper service with this merger, the evidence weighs against it," California Attorney General Xavier Becerra said in a statement.

"This merger would hurt the most vulnerable Californians and result in a compressed market with fewer choices and higher prices."

The Federal Trade Commission approved the transaction last month with conditions, but the Justice Department is still reviewing the deal.

Shares of Sprint tumbled 4.5 per cent to US$6.68 in early-afternoon trading, while T-Mobile shed 1.7 per cent to US$75.39.

AFP