Judge allows Sprint suit against AT&T’s merger with T-Mobile

November 3, 2011

(Seth Perlman/Roberto Pfeil)

AT&T had asked Judge Ellen Huvelle of the U.S. District Court of the District of Columbia to dismiss their suits. But Huvelle said Sprint and C Spire (formerly Cellular South) had legitimate claims that the combination of AT&T and T-Mobile would make it harder for smaller wireless carriers to negotiate for the best devices to run on their networks.

She agreed to hear C Spire’s allegation that it would have a harder time determining roaming contracts for its regional customers who want to be able to use their cellphones in other parts of the nation.

But she also dismissed claims by Sprint and C Spire that the merger would raise prices for consumers. In fact, she said higher prices set by a combined AT&T and T-Mobile, with more than 120 million subscribers, would likely help smaller competitors. Besides, she said, she wanted to know how the merger would harm Sprint and C Spire rather than only consumers. Huvelle will need to resolve that question in the separate antitrust suit against the merger filed by the Justice Department.

“At issue here are Sprint’s and Cellular South’s allegations regarding the injuries that they will suffer if the merger is consummated,” Huvelle said in her opinion. “Alleging harm to consumers, while relevant to showing an antitrust violation, is not sufficient to demonstrate antitrust injury.”

Sprint hailed the decision, which will add more pressure to AT&T and T-Mobile’s efforts to seal their $39 billion merger. Noting the judge’s ruling to allow the suit, some observers pointed out that there’s a high bar for private companies to meet in bringing forth lawsuits to block mergers. They have to prove personal injury, experts say.

“We are pleased that the Court has given us the chance to continue fighting to preserve competition on behalf of consumers and the wireless industry,” Susan Z. Haller, Sprint’s vice president of litigation, said in a statement.

Huvelle also dismissed claims by Sprint that the merger would lower competition and therefore hike up fees in the backhaul market. She also dismissed assertions that the deal would harm Sprint’s claims of injury for roaming and competition for spectrum.

“Sprint can spin this however they’d like, but anytime a judge dismisses nearly all your claims, it’s hardly a good day in court,” said AT&T executive vice president Jim Cicconi in a statement.

Some analysts say it is too early to know much the decision to go forward with the private lawsuits will ultimately affect the deal.

The ruling is “limited in what it says about the judge’s disposition on the central question of whether the planned merger violates antitrust law,” said David Kaut, an analyst at Stifel Nicolaus. “We nevertheless believe AT&T/T-Mo faces an uphill battle to overcome government opposition, and we remain skeptical of a settlement, with the FCC’s review an added complication.”

Huvelle will begin hearing the DOJ’s case against the merger in February. The Federal Communications Commission has yet to decide if it will approve the merger.

Related:

Number of cell phones exceeds U.S. population

Sprint’s lead merger fighter

After losing round one, AT&T braces to save merger

Cecilia Kang is a staff writer covering the business of media and entertainment.
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