Sprint-T-Mobile Merger Faces New Hurdle With Lawsuit by States

Since announcing plans to merge more than a year ago, T-Mobile and Sprint have said they need to get bigger to better serve their customers. On Tuesday, a group of state attorneys general made it clear that they did not agree.

In a lawsuit filed in Federal District Court in Manhattan, the attorneys general, led by Letitia James of New York and Xavier Becerra of California, moved to block the proposed $26 billion merger between the third- and fourth-largest wireless carriers in the United States on the basis that it would hurt competition and increase prices.

The merger, which would reshape the wireless industry in the United States by creating a large rival to AT&T and Verizon, is awaiting Justice Department approval.

But in a pre-emptive strike that could tie the companies up in the courts for years, Ms. James, Mr. Becerra and eight other attorneys general — all Democrats — sought to derail the merger before their federal counterparts weigh in.

“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,” Ms. James said in a statement.

She called the deal, which the complaint estimated would cost customers of the two companies at least $4.5 billion a year, “exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”

Mr. Becerra said the attorneys general planned to seek a preliminary injunction so that the companies would have to resolve the lawsuit before joining forces even if the Justice Department approved the merger. Also joining the suit were attorneys general from Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin.

During the Obama administration, regulators were adamant that the presence of four big nationwide wireless carriers helped keep prices low and spurred innovation. The Trump administration has not taken a similar stance.

Still, the Justice Department’s approval of the deal is not guaranteed. Makan Delrahim, the agency’s top antitrust regulator, is pushing the companies to sell parts of their businesses to maintain competition in the industry, according to two people familiar with his thinking. A decision is expected in the coming weeks.

Through an aggressive lobbying campaign, Sprint and T-Mobile have portrayed the deal as a way for the United States to expand its so-called 5G network, technology that will be at the heart of the next generation of cellular networks. The companies have said that as a single entity, they would be able to pool their resources and invest more deeply and quickly in mobile broadband innovation.

President Trump considers 5G advancement a top priority, and he has argued that China’s lead in building out mobile broadband networks poses a threat to America’s national security. The technology will be a key component in the development of robotics, driverless vehicles and other emerging industries.

Sprint and T-Mobile have powerful allies in the Trump administration. Ajit Pai, the chairman of the Federal Communications Commission, said last month that the deal would advance “critical objectives” such as “closing the digital divide in rural America and advancing United States leadership” in 5G technology.

Both the F.C.C. and the Justice Department declined to comment on Tuesday. T-Mobile and Sprint, whose stock prices slumped on Tuesday, did not immediately respond to requests for comment.

In recent months, Democratic lawmakers in Washington have been critical of the proposed deal and of the two companies’ lobbying blitz. John Legere, T-Mobile’s chief executive, has paid many visits to the F.C.C. as part of a charm offensive.

Democrats have also noted that company executives have stayed at Trump hotels repeatedly since the proposed merger was announced last year. In January, for instance, Mr. Legere stayed at the Trump International Hotel in Washington for two nights, at $2,246 apiece.

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