Sprint and T-Mobile merger faces lawsuit from 10 states: ‘Bigger isn’t always better’

Sprint CEO addresses employee question: ‘What’s going to happen to Sprint?’

Sprint's new CEO Michel Combes helped kick off day two of Sprint's "Why Sprint Now" road show at the Sprint Center in June.
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Sprint's new CEO Michel Combes helped kick off day two of Sprint's "Why Sprint Now" road show at the Sprint Center in June.

Attorneys general from 10 states are suing to block Sprint’s proposed merger with T-Mobile. presenting just the latest regulatory hurdle for the union.

New York Attorney General Letitia James, who is leading the multistate effort, filed a civil antitrust lawsuit Tuesday in New York federal court. She was joined by peers in California, Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin.

Kansas and Missouri were not listed as plaintiffs in the case.

Sprint officials declined to comment on the lawsuit.

In the court filing, James argued the merger would be bad for consumers by limiting wireless competition.

“When it comes to corporate power, bigger isn’t always better,” James said in a statement. “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.”

Sprint and T-Mobile announced their plans to merge a year ago in what would be a $26 billion deal.

It was the second time the two companies contemplated combining forces. Sprint and T-Mobile considered a merger in 2014, but ditched the effort when they believed it would face antitrust headwinds from federal regulators. T-Mobile and Sprint are the third and fourth largest, respectively, of the four major wireless carriers.

In the renewed push for a merger, both companies have said the new T-Mobile could deploy a fifth generation, or 5G, wireless network that would offer ultra-fast download speeds to customers.

They also promised that they could keep rates for customers low and grow jobs under the combined company. The merged operation would keep its primary headquarters in suburban Seattle while maintaining a secondary headquarters in Overland Park, where Sprint currently operates on a sprawling corporate campus.

Sprint employs about 6,000 people in the Kansas City area. Another 2,000 contractors work at the Sprint campus.

The lawsuit argues that a merger will decrease competition, raise consumer prices for wireless services and reduce innovation in the marketplace.

The lawsuit says that that direct competition between Sprint and T-Mobile has helped to lower consumer prices and improve service.

“The cumulative effect of this merger, therefore, will be to decrease competition in the retail mobile wireless telecommunications services market,” the lawsuit states, “and increase prices that consumers pay for mobile wireless telecommunications services.”

The Justice Department is reportedly not keen on the effect of the merger, which would leave consumers with three instead of four choices among major wireless carriers.

Sprint and T-Mobile did win the favor of members of Federal Communications Commission with a number of concessions that it added to the deal in May.

The two companies said they could bring their 5G network deep into rural America, where broadband services are limited. The companies said it could cover about 90% of rural United States with 5G speeds within six years of its merger.

They also promised not to increase fees for three years.

But those promises didn’t sway the Rural Wireless Association, an advocacy organization for rural telecommunications companies, which applauded the filing of the lawsuit Tuesday.

“This merger is bad for competition, and it is bad for consumers, especially those living in or traveling through rural areas, who will experience fewer choices, price increases, and substandard service,” Carri Bennet, general counsel for the association, said in a news release. “The process at the FCC has not been transparent and the FCC appears to be blindly accepting new T-Mobile’s words as truth.”

For its part, Sprint has sounded grim warnings about its prospects of continuing on as a standalone company.

In April, Sprint chief executive Michel Combes wrote to FCC commissioner and Johnson County native Geoffrey Starks that it would need to cut jobs and slash operating expenses if its deal with T-Mobile falls through.

“Without the merger, the trajectory for Sprint will worsen and Sprint’s prospects will be limited,” Combes said. “Sprint will be forced to further reduce its operating expenses, which means more job reductions in Kansas City and throughout the company, and our future as a standalone company will be in jeopardy.”

On May 30, Kansas City was among the first cities to get Sprint’s 5G service, covering about 225 square miles and serving 625,000 people, mostly from downtown Kansas City into Johnson County.

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Kevin Hardy covers business for The Kansas City Star. He previously covered business and politics at The Des Moines Register. He also has worked at newspapers in Kansas and Tennessee. He is a graduate of the University of Kansas
Steve Vockrodt is an award-winning investigative journalist who has reported in Kansas City since 2005. Areas of reporting interest include business, politics, justice issues and breaking news investigations. Vockrodt grew up in Denver and studied journalism at the University of Kansas.