Regulators may approve AT&T merger with T-Mobile after all

On Wednesday, the District Court of Washington DC issued its ruling on antitrust complaints from Sprint and Cellular South about the proposed merger of wireless carriers AT&T and T-Mobile. Most of the complaints were thrown out.

AT&T and T-Mobile moved to dismiss the complaints, arguing that Sprint and Cellular South failed to adequately show the merger would cause them antitrust injury. Judge Ellen Segal Huvelle said the majority of the claims would actually be dismissed, but let a few of Sprint and Cellular South's complaints stand.

"Having considered the parties' positions and the relevant legal principles, the Court will grant the motions except as to plaintiffs' claims regarding mobile wireless devices, and Cellular South's roaming claim insofar as it relates to Corr Wireless," Huvelle's ruling said.

A combined AT&T and T-Mobile would have anticompetitive buying power for new mobile devices: UPHELD

"Sprint’s and Cellular South’s complaints provide factual support for the allegation that AT&T already possesses significant market power as a purchaser of mobile wireless devices, and that the acquisition of T-Mobile threatens them with harm. Sprint alleges that the proposed transaction would add T-Mobile’s 34 million customers to AT&T’s 95 million customers, leaving the merged entity with 129 million customers (a 37 percent increase.)"

"Sprint alleges that the Federal Communications Commission (“FCC”) has found that while larger carriers can negotiate handset exclusivity agreements, smaller carriers such as Sprint cannot. Sprint cites Apple’s iPhone as an example. AT&T was the exclusive provider of the 'iconic' iPhone from 2007 until early 2011, when Apple 'gave Verizon a time to-market advantage . . . most likely because Verizon had the largest subscriber base in the United States.'"

"Cellular South’s claims to antitrust injury from the proposed transaction’s effect on the
market for wireless devices are, if anything, even more plausible. Cellular South adds narrative to the numbers and market logic alleged by Sprint:

Cellular South and other carriers have often been refused access to current devices and
given access only when the device is no longer the most current model. Cellular South
and other carriers receive older phones at higher prices. The proposed merger will
continue and exacerbate that conduct."

Interestingly, both Sprint and Cellular South (now going by the name C Spire Wireless,) recently became the third and fourth U.S. mobile carriers to carry the iPhone.

Merger would negatively affect roaming partnerships: UPHELD

The Court dismissed Sprint's roaming claim but upheld the claim by Cellular South, saying:

"Cellular South’s Corr Wireless subsidiary, which uses the GSM transmission technology, has been a roaming customer of T-Mobile and is currently a roaming customer of AT&T. As such, given that roaming is a necessary input for Cellular South, the fact that 'the removal of T-Mobile from the marketplace would leave only AT&T as a potential GSM roaming partner,' might be enough to demonstrate Cellular South’s antitrust standing…Even if Corr Wireless represents only a small part of Cellular South’s business, Cellular South’s allegations suggest that its threatened loss from the merger is plausible."

Merger would unfairly lighten AT&T's Spectrum and Network Development costs by giving it T-Mobile's already-developed spectrum bands: DISMISSED

"To the extent Sprint challenges the mere fact that, if AT&T acquires T-Mobile, it will also acquire some additional amount of spectrum, Sprint does not allege injury-in-fact. Without additional guidance as to this claim, the Court is left to assume that AT&T’s acquisition of T-Mobile’s spectrum would threaten Sprint with injury-in-fact only if the acquisition would curtail Sprint’s access to a supply of spectrum that it demonstrably needed."

This shift in spectrum would actually pile more costs onto other carriers, and force them to increase costs or delay access to new equipment: DISMISSED

"This assertion stands in sharp contrast to a complaint that is otherwise thick with allegations of cut-throat rivalry and predatory behavior in the market for mobile wireless services. Furthermore, even if the carriers’ uncoordinated actions in developing new spectrum bands have yielded positive externalities in the past, what would be anticompetitive about the proposed acquisition if it eliminated those externalities and the carriers had to pay their own costs or, as it seems that Sprint is alleging, if the acquisition caused the costs to be split three ways rather than four? This assertion lacks sufficient factual support."

Merger between AT&T and T-Mobile would create a "Backhaul Monopoly": DISMISSED

"As it stands, Sprint’s claims fail. Sprint alleges no facts to support its theory that the elimination of T-Mobile as a purchaser of backhaul will increase concentration among backhaul sellers by putting the independent providers out of business...Because its complaint leaves so much to conjecture, Sprint fails to adequately allege a threatened injury-in-fact in the backhaul market. Defendants’ Motion to Dismiss Sprint is granted as to Sprint’s backhaul claim."