Just days after the U.S. Justice Department moved to oppose AT&T's proposed takeover of T-Mobile, Sprint Nextel has filed an antitrust lawsuit of its own opposing merger of the two wireless carriers.
According to the new lawsuit, the merger would harm Sprint as well as other independent U.S. wireless carriers because a combined AT&T and T-Mobile would be able to leverage its heightened control over backhaul (intermediate networks), roaming and spectrum to restrict or exclude wireless competition. Moreover, Sprint said, the deal would harm U.S. consumers and corporate customers by causing higher prices and less innovation.
"Sprint opposes AT&T's proposed takeover of T-Mobile," said Susan Haller. Sprint's vice president for litigation. "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."
Sprint contends the merger would violate the Clayton Antitrust Act. Sprint's complaint was filed in U.S. District Court in Washington, D.C. -- the same court in which the U.S. Justice Department has submitted its legal brief.
The Clayton Antitrust Act prohibits business conduct not deemed in the best interest of a competitive market, including mergers and acquisitions that may substantially lessen competition. The act outlines remedial enforcement measures that federal courts may impose on civil-suit defendants.
Sprint Study Contradicts Job Claims
Though AT&T has claimed its T-Mobile deal would ultimately help create new jobs, a study commissioned by Sprint contends that AT&T's $39 billion deal would almost certainly lead to the elimination of thousands of American jobs as the combined AT&T/T-Mobile entity works to lower its capital expenditures by $10 billion.
AT&T's jobs creation claim, which is based on an Economic Policy Institute (EPI) memorandum, ignores potential reductions in capital expenditures that T-Mobile would have otherwise been forced to undertake on its own, observed the report's author, David Neumark, an economics professor at the University of California, Irvine.
"Indeed, AT&T has told the federal government and its investors that the merger would lead to reduced capital expenditures -- which by EPI's own logic would lead to fewer jobs," Neumark said. "And AT&T has acknowledged there would be other job reductions resulting from the merger."
According to Neumark's study, AT&T has been responsible for the elimination of more than 107,000 job-years relative to the state of affairs if AT&T's employment had simply grown by the number of employees it acquired through several other acquisitions since 2002.
"This deal is bad for consumers, bad for competition and bad for the economy," said Sprint Senior Vice President Vonya McCann.
In announcing the federal government's position last week, U.S. Deputy Attorney General James Cole noted that consumers across the country -- including those in rural areas and those with lower incomes -- have benefited from competition among the nation's wireless carriers, particularly the four remaining national carriers.
"We are seeking to block this deal in order to maintain a vibrant and competitive marketplace that allows everyone to benefit from lower prices and better quality and innovative products," Cole said at a news conference.
Though the Federal Communications Commission's own review of AT&T's proposed merger with T-Mobile is not complete, the record before the commission also raises serious concerns about the effect of the proposed transaction on competition, noted FCC Chairman Julius Genachowski.
"Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile," Genachowski said. "Competition fosters consumer benefits, including more choices, better service and lower prices."