TMUS T Mobile US Inc

By Brent Kendall and Drew FitzGerald 

The Justice Department and Federal Communications Commission on Friday filed court papers criticizing a lawsuit by state attorneys general that seeks to block the merger of T-Mobile US Inc. and Sprint Corp.

The states' lawsuit, argued out during the past two weeks in a New York federal court, marked an unusual rejection of conclusions reached by the Justice Department and FCC, which approved the merger earlier this year after the two carriers made a range of concessions. Those included equipping Dish Network Corp. with the building blocks to create a cellphone network, which would preserve four players in the consumer wireless market.

A group of 13 states and the District of Columbia say the concessions aren't good enough to protect consumers from the prospect of higher prices if the merger is allowed.

U.S. District Judge Victor Marrero, who is presiding over the states' case, has called the Justice Department the "elephant not in the room."

The department and FCC fired back at the states in Friday's court filing, arguing the states' merger challenge would undo important consumer benefits secured by the federal government during its review and approval of the merger, such as improved service in rural America.

"Both agencies bring a nationwide perspective to their analysis of the transaction that the litigating states lack," the Justice Department and FCC said in the brief.

Spokespeople for the attorneys general of New York and California, which are leading the merger challenge, declined to comment.

Judge Marrero heard extensive testimony this month from some of the telecom industry's top executives, including T-Mobile Chief Executive John Legere and Dish Chairman Charlie Ergen.

The companies involved have argued the states' lawsuit ignored immense cost savings from combining the two cellphone carriers' networks, efficiencies that could mean lower prices for customers. They also said Dish would become a more formidable competitor than Sprint, which has been shedding customers for years.

Lawyers for the states spent Friday chipping away at the defense, calling back two economists to dispute the companies' assertions and the Justice Department-led fix proposed earlier this year.

"Dish is not going to be an independent competitor," Yale University economics professor Fiona Scott Morton said, because Dish and T-Mobile "are very entangled" under the network-sharing agreement stipulated by the Justice Department. Mr. Ergen earlier this week said the divestiture deal guaranteed Dish service on T-Mobile's network under unusually favorable terms, making the two companies true rivals.

Carl Shapiro, an economics professor at the University of California in Berkeley, warned of the risk that AT&T Inc., Verizon Communications Inc. and a larger T-Mobile would coordinate their actions to lessen competition, even without directly conspiring with each other.

The states, to back up that claim, showed an internal T-Mobile email in which a senior executive said an iPhone promotion should have an end date "to signal to our competition that it was really just our turn" and there was "no need to panic."

Judge Marrero picked at the professor's argument, which included a graphic depicting a potential three-way battle among the carriers with Sprint out of the picture.

"Dish might ask, 'What are we, chopped liver?'" the judge said.

Mr. Shapiro said he "would not think that Dish would be part of this club," at least not in the first year after the merger.

"Dish falls far short of replacing Sprint for the next few years," he added.

Both sides said they hoped Friday would be the last day of witness testimony in the case. Closing arguments are expected in January.

Write to Brent Kendall at brent.kendall@wsj.com and Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

December 20, 2019 15:21 ET (20:21 GMT)

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