Nine states have filed a lawsuit to block the proposed merger between wireless carriers Sprint and T-Mobile. California, Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, New York, Virginia, and Wisconsin claim the merger would reduce competition and drive up the cost of cellphone service. The result would have a particularly tough impact on lower-income people.
“The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country,” said New York Attorney General Letitia James in a statement issued by the states.
California Attorney General Xavier Becerra said that the result would be a “compressed market with fewer choices and higher prices.”
One stated rationale for the merger is that the companies say it would help them with rolling out faster 5G mobile technology.
“Verizon and AT&T can finance a 5G rollout, but it’s not clear that these two companies can on their own,” said Martin Wolf, president of martinwolf M&A Advisors, an IT merger and acquisition consultancy. “And from a competitive perspective, I’d rather have three 5G providers than two, especially considering the US is behind the rest of the world in 5G. The principal beneficiaries of a successful, cost effective roll out are the under-served, the poor, the old and the rural.”
But others don’t necessarily agree. One concern is the so-called four-into-three scenario, where the third and fourth largest carriers would become a single company. “That raises competitive issues, particularly since numbers 3 and 4, particularly T-Mobile, has been a maverick in the marketplace and played a very pro-competitive role even as it’s gained market share,” said David Turetsky, a professor of practice at the University at Albany, SUNY and a former deputy assistant attorney general for antitrust in the Clinton administration’s Department of Justice. “T-Mobile plays a unique role in innovation. If you basically change the market dynamic, there’s no assurance that’s going to continue.”
As for 5G, “These carriers either by cooperating without merging or through other ways will have to do it, too,” Turetsky said. “I don’t see it as something that would only happen if there was a merger.”