Sprint And AT&T Square Off In Court Today
Judge Ellen Huvelle will listen to arguments in U.S. District Court in Washington, D.C., today over whether Sprint has a right to sue AT&T over its proposed acquisition of Deutsche Telekom’s T-Mobile unit for $39 billion. It’s unusual for a company to actually go to court to block a merger. Since the Justice Department is also suing to block the merger (with the support of seven states), it’s doubly unusual. But that doesn’t mean that all outside forces are allied against AT&T and T-Mobile, although many consumer advocates are.
Channeling many consumers’ opposition, deputy attorney general James M. Cole has stated that “the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services.”
But glancing at other headlines this morning, it would appear that a broad base of support for letting the marriage happen includes folks ranging from the Obama Administration (outside of Justice) to Republican state representatives who represent rural populations, such as Maine and Nevada, to the attorneys general of 11 other states, to organized labor, led by the Communications Workers of America (CWA), which says that the planned expansion of AT&T’s broadband network will create 96,000 new jobs in the U.S., among other benefits.
AT&T will argue today that, because Sprint is a competitor rather than a consumer, it has no right under antitrust law to bring suit against the merger, writes Bloomberg’s Tom Schoenberg and Sara Forden. If the suit is allowed, Sprint has asked for access to confidential AT&T records that the Justice Department collected from AT&T during information. It points out that, as a competitor with relevant information, AT&T is allowed to subpoena Sprint documents.
Even if the suit is dismissed, however, Sprint could assist the Justice Department, McCarthy, Sweeney & Harkaway antitrust lawyer Jeffrey Jacobovitz tells Schoenberg and Forden. “They can attempt to file amicus briefs with the court and feed the government information to support their case,” he says.
“As much as a merger may infuriate rivals sitting on the sidelines, tactics such as Sprint's are rare,” writes Brent Kendall in the Wall Street Journal. “The legal bills are high, and the potential gain is often unclear. What's more, the very act of challenging a merger may undermine a company's argument by leaving the impression that it wants to protect its own interests, rather than those of consumers.”
Sprint argues that the merger would transform the market into a duopoly of AT&T and Verizon Wireless "where Sprint is marginalized and no longer able to constrain prices," Kendall writes.
But the White House has clearly been trying to distance itself from the Justice Department’s actions. “The government’s action “is beginning to shape up as the antitrust case from hell” for President Obama, who not only is facing intense pressure from AT&T and T-Mobile, but also organized labor, The Fiscal Times’ Kirk Victor tells us. The CWA alone has contributed more than $30 million to presidential campaigns since 1989, 94% of which went to Democrats, according to the Center for Responsive Politics. And the ALF-CIO also thinks the government’s suit is “ill-advised.”
Victor writes that it’s “possible that AT&T may spare itself and the White House the agony of a protracted court case by offering concessions to address the government’s concerns that the T-Mobile deal is anti-competitive and could cause the prices of wireless service to rise. But that would require AT&T to sell up to 25% of T-Mobile business, including airwaves and customers, to avoid a situation in which just three companies controlled 90% of the U.S. wireless market.”
In addition to the jobs creation, AT&T is pointing to the expanded network capability the merger will create. Chris Shelton, international vp for District 1 of the CWA, writes in Crain’s New York Business that “the new company will speed up the build-out of the most advanced telecommunications networks to millions of unserved Americans -- more than half a million people in New York state lack access to broadband -- and will strengthen the rights of workers in the wireless industry.”
Nevada state senator James Settelmeyer invokes his hard-working, cattle-ranching grandfather in writing that the 4G LTE broadband that the merger would bring “the same data speeds on a mobile device that urban cities like Sacramento and Houston already enjoy.” And, he claims, that “will change the way we live and communicate” in a piece in the Nevada Appeal.
Writing on the Maine Compass site, Robert Nutting, speaker of the Maine House, says that while he initially feared that the merger would adversely affect employment at a T-Mobile call center in the state, he has subsequently been assured that the deal would actually bring 5,000 call-center jobs back to the U.S.
“I also have observed that AT&T supports various organizations in the mid-Maine area that T-Mobile has supported in the past, actions that signal it plans on being a good corporate community partner that intends to have a business presence in the area for years to come,” he writes.
Meanwhile, in Saturday’s Wall Street Journal, Anton Troianovski gives us a peek at T-Mobile’s strategy if the merger is shot down: Low-end, no-contract $50-to-$70 prepaid plans for its Mobile 4G network that it introduced earlier this year.