• by Thom Forbes  @tforbes, September 7, 2011

Sprint has filed suit to block AT&T's proposed acquisition of T-Mobile, adding yet another barrier to the deal getting done. The suit was brought in U.S. District Court in Washington, D.C., where the Justice Dept. last week also sued AT&T and T-Mobile, a unit of Deutsche Telekom AG, saying that their union would "substantially lessen competition," as Bloomberg reported. 

Huffington Post's Ina Fried says yesterday's action "sounds a bit like overkill." Indeed, both suits have been assigned to Judge Ellen Segal Huvelle. But there may be more legal action to come, according to the New York Times' Dealbook: "It is the first of a potential string of lawsuits aimed at stopping the blockbuster telecommunications merger, though it would most likely be subordinate to the Obama administration's case," writes Michael de la Merced.

"With today's legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal," Susan Haller, Sprint's vp-litigation, says in a statement.

"Sprint has the opportunity to make additional arguments that the government may not make," Melissa Maxman, an antitrust attorney with law firm Cozen O'Connor tells the Wall Street Journal's Greg Bensinger. "They can argue more vigorously that they are the injured party in this merger."

The government's move last week seemed to take the two carriers by surprise. "We have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated," said AT&T's general counsel Wayne Watts, adding that it would fight the suit. Deutsche Telekom also said it would contest the suit.

But Sprint's action can't be a surprise. It's CEO, Dan Hesse, has been " exceptionally vocal in listing reasons to oppose the deal" from the get-go, as de la Merced points out, saying in one speech that "competition will be stifled, growth will be stifled, and wireless innovation will be jeopardized."

The government suit claims that an AT&T/T-Mobile juggernaut "would result in tens of millions of consumers ... facing higher prices, fewer choices and lower quality products for mobile wireless services and that stopping the buyout "will help protect jobs in the economy" since mergers usually reduce jobs.

"The first of these claims has no factual basis -- indeed, the market believes otherwise. The second is indefensible as social policy," Yale law school teacher George L. Priest wrote in a Wall Street Journalopinion piece yesterday. Indeed, Priest believes that there are several reasons to believe that a combination of AT&T and T-Mobile would lower prices and improve quality -- and if it didn't, it would create a market opportunity for Sprint, wouldn't it now?

"The market share guidelines upon which the Justice Department relies to oppose this acquisition may make sense in the context of manufacturing industries'" Priest writes. "But they make no sense in the context of networks in which there are great benefits from large networks with large market shares."

Priest doesn't think much about an argument to retain "redundant jobs" either. The Communications Workers of America may not agree with that line of thinking but last week it nonetheless supported the merger. CWA telecommunications policy director Debbie Goldman said that T-Mobile is losing customers and money and has no future as an independent entity. She also condemned Sprint for outsourcing and off-shoring its customer service work, Thomas Claburn points out in Information Week.

All along there have been suggestions -- and rebuttals -- that a deal between T-Mobile and Sprint might make more sense to everybody (except AT&T, of course, which also stands to lose about $7 billion in cancellation fees if the deal is scotched.)

EWeek's Dan Reisinger doesn't think the deal will survive the court battles. He also points out that the FCC has yet to weigh in on whether it will allow the transfer of wireless licenses required by the deal.

"Perhaps another deal could be forged from the ruins of this one," he writes. "The way it looks right now, the market would be well-served if Sprint and T-Mobile combine forces to take on AT&T and Verizon in the U.S. wireless business." He then lists 10 reasons why it all makes sense. No. 1 is that the government would approve it. No. 10? "Perhaps ... a pricing war will ensue, and customers, looking for the best deal, might just benefit."

Yippee. There's nothing like a good old-fashioned pricing war to recharge the cockles of a marketing reporter's heart -- particularly if he's perfectly happy with the cheaper T-Mobile Family Plan he fears will go the way of a T-Mobile call placed in the hinterlands of exurbia (which is to say, into the void) if the AT&T deal goes through.