Yesterday, Illinois became the 17th state to join the multistate lawsuit trying to block the T-Mobile (TMUS) and Sprint (S) merger. New York Attorney General Letitia James is leading 16 other state attorneys general who oppose the deal based on antitrust concerns.
Critics take Illinois on board
“With Illinois’ addition to our lawsuit, more than half the U.S. population is now represented by states that are suing to block the anticompetitive megamerger of T-Mobile and Sprint,” noted James. “We welcome Attorney General Raoul to our growing coalition that now includes 17 attorneys general, all who have opposed this merger because it remains bad for consumers, bad for workers, and bad for innovation.”
Critics oppose this merger, as they believe the union of the two telecom firms would reduce competition and unfairly benefit T-Mobile. However, even after the merger, T-Mobile is expected to remain in third place in terms of market share. Verizon and AT&T (T) are currently the top two wireless carriers in the country.
With Sprint’s additional subscribers, Verizon and AT&T should feel more heat from T-Mobile. Deutsche Telekom–controlled T-Mobile believes that it would be in much better shape to rollout 5G if the merger gets the green light.
T-Mobile-Sprint merger remains uncertain
To address these antitrust concerns, the merging entities agreed to divest some of their assets to Dish Network (DISH). Dish would form the fourth-largest wireless carrier in the country, replacing Sprint.
The Department of Justice has already approved the proposed $26 billion merger between the third- and fourth-ranked wireless carriers. FCC Chair Ajit Pai also recommended approval for the merger last month.
Notably, T-Mobile said that it would address the concerns of the state attorneys general before closing the deal. A trial is set to begin in December. For more information, please read T-Mobile and Sprint’s Deal in Peril despite FCC Chair’s OK.
T-Mobile underlined Sprint’s weakness in its response to the state attorney’s lawsuit. An August 28 Bloomberg report noted, “Sprint Corp. is unlikely to be a meaningful competitor as a standalone wireless company in the coming years because it’s struggling financially on multiple fronts with no end in sight, T-Mobile US Inc. said in response to a lawsuit by states seeking to block their merger.”
In its court filing, T-Mobile also pointed out Sprint’s “huge debt load” and negative cash flow as important concerns. In comparison, T-Mobile has been growing its subscriber base with its aggressive marketing strategies. For more, please read Why T-Mobile Has Partnered with Burger King.
Sprint has been losing customers during the last few quarters, resulting in financial stress. During the company’s August 2 earnings report, Sprint CEO Michel Combes stated, “While we delivered good results in the first quarter relative to expectations, the business still faces several structural headwinds and I remain convinced the merger with T-Mobile is the best outcome for our customers, employees, industry and all stakeholders.”
To learn more, please read Sprint’s Woes Look Bigger amid Pending T-Mobile Merger.
T-Mobile and Sprint are valued at $66 billion and $27 billion, respectively. Verizon and AT&T are currently valued at $240 billion and $258 billion, respectively.
Shares of T-Mobile and Sprint have been trading in a narrow range since last month. Both stocks hit a 52-week high after receiving the Department of Justice’s approval on July 26. So far this year, T-Mobile stock has surged 23% while Sprint is up 15%. AT&T stock has risen almost 25% during the same period.