Justice Department, FCC File Papers Supporting T-Mobile-Sprint Merger--3rd Update
December 20 2019 - 4:09PM
Dow Jones News
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., adding the federal government's voice to an unusual
case on its final day of testimony.
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 rested their cases Friday, ending the trial sooner
than expected to avoid litigating during the week of Christmas.
Closing arguments were scheduled for Jan. 15.
Write to Brent Kendall at brent.kendall@wsj.com and Drew
FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
December 20, 2019 15:54 ET (20:54 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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