T-Mobile/Sprint merger trial pushed back as Texas joins opposition

The start of the trial for the states that are opposing the merger of Sprint and T-Mobile has been pushed back to December as yet another state—Texas—joined the coalition intent on blocking the deal, bringing the total opposing states to 14 and the District of Columbia.

Texas Attorney General Ken Paxton announced Thursday that Texas would join the coalition. Paxton, a Republican, joined the other attorneys general who are Democrats. Also on Thursday, a court ruled that the state AG case against the merger will be moved from October 7 to early December.

“While we appreciate the time and effort that went into the agreement between the parties and the U.S. Dept. of Justice, the Texas Attorney General has an independent obligation to protect Texas consumers. After careful evaluation of the proposed merger and the settlement, we do not anticipate that the proposed new entrant will replace the competitive role of Sprint anytime soon,” Paxton said in a statement. “The bargain struck by the U.S. Dept. of Justice is not in the best interest of working Texans, who need affordable mobile wireless telecommunication services that are fit to match the speed and technological innovation demands of Texas’ growing economy.”

The New York and California co-led lawsuit was originally filed on June 11 and includes the attorneys general of Colorado, Connecticut, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, Virginia, Wisconsin and the District of Columbia. At a hearing in the U.S. District court for the Southern District of New York on Thursday, counsel for New York advised the court that other states possibly could join the lawsuit next week.

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Last week, the DoJ announced that it and the attorneys general for five states—Nebraska, Kansas, Ohio, Oklahoma and South Dakota—reached a settlement with T-Mobile and Sprint regarding the proposed merger. The settlement requires the divestiture of Sprint prepaid brands, including Boost Mobile, to Dish Network, as well as 14 megahertz of 800 MHz spectrum from Sprint to Dish for about $3.6 billion. T-Mobile and Sprint also need to make at least 20,000 cell sites and hundreds of retail locations available to Dish, which will get access to the T-Mobile network on an MVNO basis for seven years while Dish builds its own 5G network.

Those concessions obviously were not enough to satisfy the states opposed to the combination. Others who have been opposed to the deal, like the Communications Workers of America (CWA), are not budging either.

“The news that Texas has joined the states’ lawsuit underscores that the T-Mobile/Sprint merger is and remains anti-competitive and harmful to consumers and workers,” said Debbie Goldman, Research and Telecommunications Policy Director for the CWA, in a statement today. “Nothing in the announced divestiture deal remedies these concerns, as Texas AG Paxton clearly recognizes. In fact, as we noted last week, through the announced divestiture deal with Dish, T-Mobile is creating its largest customer, not a new competitor.”

In a note to investors Friday, Wells Fargo Securities analyst Jennifer Fritzsche noted that while the judge overeeing the hearing on Thursday will not be the same judge hearing the case in December, the development adds additional uncertainty.

“Although we believe that TMUS is working (intensely) in trying to resolve this matter with the AGs, the politics of all this (with most of the states being Democratic ones) may mean that no amount of concessions will satisfy them.... especially going into an election cycle,” she wrote. “The addition of TX to the fray is concerning as this could begin what we would label a ‘pile on’ effect.”

Vivek Stalam of New Street Research attended the hearing Thursday and in a research note said the December 9 trial date could get moved up a week to December 2, pending the judge’s schedule. Given prior guidance that a trial would take two to three weeks, with some holidays in there and assuming it takes six weeks for a decision, “it looks like a February decision,” he said.  

Status at FCC

Although FCC Chairman Ajit Pai has endorsed the transaction and fellow Republican Commissioner Brendan Carr also published his support for the deal, it has yet to be voted on by the full commission. Asked about its status during a press conference on Thursday, Pai said an item on it would be circulated “soon.”

FCC Commissioner Jessica Rosenworcel released a statement last week saying that she remained skeptical even after the concessions involving Dish. Both she and fellow Democratic Commissioner Geoffrey Starks have called for a public comment period on the deal.

Michael O’Rielly, a Republican, declined to comment when asked about the newly structured transaction during a press conference Thursday.

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Soon after the arrangement with Dish was announced a week ago, Dish executives called Rosenworcel, Starks and O’Rielly to explain how the DoJ’s judgment and related agreements solved the competitive harms of the transaction as it was originally proposed by, among other things, facilitating Dish’s entry into the market as a fourth nationwide facilities-based carrier.