Sprint Nextel Corp. (S) is keeping the pressure on AT&T Inc. (T), filing a lawsuit looking to stop its proposed $39 billion acquisition of T-Mobile USA Inc. just days after the Department of Justice said it will file a lawsuit with similar intent.
The Sprint Nextel lawsuit was filed in federal court in the District of Columbia and claims the proposed transaction violates Section 7 of the Clayton Act. The lawsuit, which was filed as a related case to the DoJ lawsuit, names AT&T, AT&T Mobility, T-Mobile USA and its parent company Deutsche Telekom AG (DTEGY) as defendants.
Sprint Nextel claims the deal would harm the competitive environment of the wireless industry that would result in higher prices and less innovation; strengthen the competitive position of AT&T and Verizon Wireless in their current position as the industry’s dominant players with more than 75% market share and 90% of profits; and harm the competitive environment as “a combined AT&T and T-Mobile would have the ability to use its control over backhaul, roaming and spectrum, and its increased market position to exclude competitors, raise their costs, restrict their access to handsets, damage their businesses and ultimately to lessen competition.”
Sprint Nextel has long opposed the deal, which was announced in March, stating it would harm competition. The carrier was rumored to itself be looking at a merger with T-Mobile USA prior to AT&T’s proposed bid.
The DoJ noted in its lawsuit that the proposed deal would “substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.”
The Federal Communications Commission, which is also reviewing the proposed acquisition, has remained fairly quiet, though FCC Chairman Julius Genachowski did note that the DoJ lawsuit did raise concerns about the deal. The FCC recently restarted its 180-day review process on the deal.
The DoJ lawsuit is reportedly ready to move forward in the coming weeks as Bloomberg has said the judge in the case has ordered the parties involved to come to court on Sept. 21 to discuss “the prospects for settlement.”
Speculation has run rampant since the DoJ filing that AT&T was scrambling to salvage the proposed acquisition through a number of means, including scaling back the size of the deal to appease regulators. There has also been some confusion as to what, if any, portion of the break-up fee originally placed on the deal AT&T could be liable for if the acquisition either falls apart or is sharply curtailed.
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