Sprint could be winner in thwarted T-Mobile-AT&T deal

Kansas City StarSeptember 3, 2011 

The federal government's lawsuit Wednesday to stop AT&T's $39 billion merger with T-Mobile USA handed Overland Park-based Sprint Nextel Corp. at least a partial victory.

Sprint's next move, some analysts say, could be to take over AT&T's role as suitor for T-Mobile, the nation's fourth-largest wireless carrier, but Sprint wasn't commenting beyond the news of the day.

"If this deal in the end doesn't go through, then there's a pretty good chance that Sprint will end up with T-Mobile," said Timm Bechter, an industry analyst at Waddell & Reed Financial Inc. in Overland Park. "They will pick up that conversation again if this deal is terminated."

AT&T, which had surprised the telecom world with its March bid for T-Mobile, vowed to "vigorously contest" the U.S. Department of Justice lawsuit. It complained that the antitrust action had come with "no indication" it was being contemplated.

The Justice Department said it moved to block the merger after an "exhaustive investigation" and cited its "significant experience in this industry going back as far as the original breakup of AT&T" in the early 1980s.

Sprint chief executive Dan Hesse has fought the merger publicly, including at a recent Senate subcommittee hearing. The company's statement Wednesday applauded the antitrust lawsuit, saying it would "ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry."

The Justice Department lawsuit, filed Wednesday in U.S. District Court in the District of Columbia, said that allowing two of the nation's "Big Four" wireless carriers to merge would be likely to mean "higher prices, less product variety and innovation, and poorer quality services" because of "reduced incentives to invest."

The lawsuit relied in part on T-Mobile's description of itself as a "challenger brand" that employed "disruptive pricing" while innovating by offering the first cellphones driven by the Android software. Android smartphones have emerged as high-end competitors for Apple's iPhone.

The court filing skirted AT&T claims that the merger would still leave several competitors in nearly all major markets. The lawsuit essentially dismissed smaller regional carriers as ineffective competitors against the Big Four.

Competition among those largest companies happens nationally, the Justice Department lawsuit said, and the merger fails on anti-competitive concerns. If the merger went through, Sprint would be a much smaller No. 3 wireless company, behind AT&T and Verizon Wireless.

The suit also measured concentrations of business the merger would create in the largest 100 markets and, again, found them unacceptable.

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