T-Mobile, Sprint head to court to defend merger

Coalition of states asks court to block deal

(CNN) - Attorneys general from more than a dozen states are flexing their legal muscles in a landmark trial that could block T-Mobile's $26 billion merger with Sprint.

The trial, which begins Monday in Manhattan federal court, ranks among the most consequential in the history of the telecommunications industry. It challenges a combination of the third- and fourth-largest wireless providers in America, who say they need to join forces to compete more effectively against Verizon and AT&T. (AT&T's subsidiary, WarnerMedia, owns CNN.)

In asking a court to prevent the mega-deal, a coalition of state officials led by Xavier Becerra, California's attorney general; and Letitia James, attorney general of New York; broke from the U.S. government. Earlier this year, the merger received a green light from the Justice Department and the Federal Communications Commission.

The resulting court battle will determine the future of T-Mobile, but if the companies are barred from merging, it could send a warning signal across the business world.

"Consolidation is a phenomenon that's accelerating not just in one or two markets," Becerra told CNN on Monday. "We see it in the healthcare sector, all these digital platforms and services that are able to acquire and use our data... and in many cases, the fear is that these consolidations are about more than extracting efficiency."

T-Mobile and Sprint have argued that their deal will lead to benefits for consumers. For the first three years after the close of the deal, T-Mobile CEO John Legere has said, the combined company will refrain from increasing prices. That would lock in some of the companies low-cost plans, such as T-Mobile's $15-per-month prepaid plan that will include 2 gigabytes of mobile data, which the company announced last week.

But T-Mobile's acquisition will eliminate a vigorous competitor from the mobile marketplace, lawyers for the states are expected to argue before Judge Victor Marrero. The deal will lead to higher prices for cellphone plans and fewer choices for consumers in the long run and undermine a longstanding belief that the country is better off with at least four competing national wireless carriers, according to the states.

"The greater the options, the greater the chance to test quality and the better a market can meet the needs of American consumers," Becerra told reporters in a conference call on Monday.

To address those concerns, T-Mobile and Sprint committed to federal authorities this year to spin off some of their customers into a new fourth competitor to be managed by Dish Network, the satellite TV company.

That move, they said, will maintain competition while allowing the combined T-Mobile and Sprint to accelerate the rollout of new, ultra-fast 5G mobile data.

"New T-Mobile's vision promises to help close the digital divide by making robust, high-speed broadband internet access available to virtually every American on their mobile wireless devices," the companies said in a pre-trial memo filed to the court.

In recent months, T-Mobile has successfully winnowed down the list of states it faces in court — reaching settlements with individual attorneys general in Texas, Mississippi and Colorado.

But state officials representing 40% of the U.S. population still oppose the deal. The list includes the attorneys general of Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Oregon, Pennsylvania, Virginia and Washington, D.C.

Each state has the right to make its own choices about whether to negotiate settlements with the companies, said James.

"Our doors are always open," she said. "But we know this merger would hurt consumers and workers across the country."