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States seek delayed trial date on T-Mobile/Sprint deal

July 16, 2019

The states that are trying to block the T-Mobile/Sprint merger on Monday argued that an Oct. 7 trial date is no longer feasible.

Both the states and the companies last month agreed to the October trial date, but because T-Mobile and Sprint didn’t meet stipulated deadlines—which included sharing completed terms of the merger—“the October trial date and most intervening dates are no longer feasible,” a lawyer for the states said in a letter to the New York court.\

 

The companies have been meeting with the U.S. Department of Justice (DoJ) over terms that would presumably give it a green light if certain divestitures are made. Although exactly what’s being proposed is under wraps, most media reports have Dish Networks getting Boost Mobile and other assets.

 

“Although it is very unlikely that any settlement between Defendants and USDOJ could prevent the anticompetitive injury that the proposed merger will cause, there is no doubt that the settlement would dramatically change the nature of the evidence needed for trial, including critical and time consuming expert analyses,” the states' letter stated.“Defendants will likely argue that this divestiture reduces or eliminates the anticompetitive effects of the proposed merger, but Plaintiff States cannot possibly take discovery concerning such divestitures until there is an actual agreement in place and the scope, terms and parties are clearly defined,” it added.

 

In a note to investors, New Street Research policy analysts on Monday noted that in the companies' answers to the states’ complaint filed earlier with the court, T-Mobile and Sprint use 5G in a subtle manner to raise Sprint’s viability, but don’t use a “flailing firm” argument as an affirmative defense.

 

“One of the interesting questions for the trial is the extent the companies will claim Sprint’s weakness justifies approving the deal,” wrote the New Street analyst team led by Blair Levin. “There was some thought that they would raise the ‘flailing firm’ argument as an affirmative defense. They do not.”

 

Quoting a passage in the companies’ answer to the court, the analysts noted that they do, however, assert that “Contrary to Plaintiffs repeated claims, Sprint is not likely to play a meaningful competitive role as a standalone company in the years to come. Sprint has steadily lost subscribers, its free cash flow has been overwhelmingly negative; its market share has steadily declined since 2013, and it is struggling with its huge debt load and interest expense that in the last year was greater than its operating income. Plaintiffs’ prediction that Sprint would abruptly reverse this long trend and emerge as a vigorous standalone competitor is nothing more than wishful thinking.”

 

If a deal with Dish is announced, the analysts said, “that paragraph will become more important as the parties argue who is engaging in the most in wishful thinking.”

 

Reports surfaced last month observing that Dish had become the lead candidate for assets that T-Mobile and Sprint would need to divest in order to get their $26.5 billion merger over the regulatory finish line. It was an especially interesting turn of events given that Dish has been a leading opponent of the merger through the 4Competition Coalition. The company has amassed spectrum, to be sure, and is now building out a narrowband IoT (NB-IoT) network designed to compete at some scale, but it doesn't have experience as a facilities-based wireless service provider.

 

Source: https://www.fiercewireless.com/wireless/states-seek-delayed-trial-date-t-mobile-sprint-deal

 

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