NEW YORK -- Messages by a Sprint executive revealed in federal court suggested he thought an acquisition by T-Mobile might push up mobile-service prices for consumers, undercutting T-Mobile's argument that its deal will benefit Americans.
The text messages, presented by attorneys for a coalition of states suing to block the deal on antitrust grounds, were sent in October 2017 by Roger Sole, Sprint’s chief marketing officer, to Sprint's then-CEO Marcelo Claure. Sole wrote that customer prices could rise an average $5 per user if a deal went through.
He added that prices could also rise at AT&T and Verizon once the wireless market consolidated to three competitors from four. At the time, Sprint and T-Mobile were negotiating terms of an acquisition.
Merger supporters argue that a combined T-Mobile and Sprint will emerge as a fiercer rival to Verizon and AT&T that will help keep prices low. In testimony, Sole said he was simply presenting a “hypothetical” and that he did no formal analysis to arrive at the $5 number.
A group of 14 state attorneys general, led by New York and California, are trying to convince a federal judge that the $26.5 billion deal should be blocked. T-Mobile has already notched approvals from key federal regulators, setting up an unusual situation where states officials are seeking to overturn their federal counterparts.
The trial, in U.S. District Court in New York, opened Monday and is expected to last several weeks. The states argue that having one fewer mobile carrier would reduce competition and cost Americans billions of dollars in higher phone bills.
T-Mobile and Sprint currently provide cheaper alternatives to Verizon and AT&T, and T-Mobile has branded itself the “Un-carrier,” one that has made consumer-friendly changes such as bringing back unlimited-data plans and shattering two-year service contracts. There are concerns that less competition would put an end to these types of changes, although T-Mobile says that won’t happen.
In their questioning Monday of Sole and another Sprint executive, Angela Rittgers, lawyers for the states aimed to demonstrate that the competition between Sprint and T-Mobile was key to lowering prices and bringing unlimited plans back to the wireless market, benefiting consumers.
In one example, they showed an email from Claure to Sole, saying Sprint had to match a buy-one-get-one-free offer from T-Mobile for the iPhone 8. “We have no choice,” Claure said.
T-Mobile defends its deal as good for competition. It says the combined T-Mobile and Sprint will be able to build a better 5G network — a priority for the Trump administration — than either company could manage on its own. It has also promised not to raise prices for three years,
The deal got the nod from both the Justice Department and the Federal Communications Commission, thanks to T-Mobile’s unusual commitment to create a brand-new mobile carrier in a deal with satellite-TV company Dish.
T-Mobile agreed to sell millions of customers to Dish and to rent its network to the fledgling rival while it built its own. Absent that arrangement, the Justice Department said, the deal would have been bad for consumers. Dish would start providing cellphone service after buying Sprint’s current prepaid-service business. Dish is also required to build a faster, next-generation network, known as 5G, over the next several years.
The states says the Dish fix isn’t good enough, because Dish wouldn't immediately be as strong a competitor today as Sprint is.
Dish, a satellite TV company with a shrinking customer base, has spent about $21 billion over a decade buying wireless spectrum, the airwaves for transmitting data and calls, although the company hasn’t done much with it. Analysts have long questioned whether Dish intends to build its own network or simply profit by selling the spectrum to others. Post-deal, Dish faces up to $2.2 billion in fines if it fails to create a 5G network that serves 70% of the country by 2023.
Dish must “start from scratch,” said Nicholas Economides, a New York University business school professor who joined six economists in criticizing the Dish settlement as inadequate to make up for the loss of Sprint.
T-Mobile CEO John Legere has insisted that Dish will be more formidable than Sprint, which has a worse network than its rivals and has been losing customers. That limits its ability to invest in network improvements.
Legere is stepping down as CEO next spring. He and Michael Sievert, T-Mobile President and Chief Operating Officer and incoming CEO, are expected to testify later this week. Other notable witnesses include Deutsche Telekom CEO Timotheus Höttges, who began his testimony Monday. Deutsche Telekom, a Germany company, is T-Mobile's majority shareholder.