NEW YORK -- A group of U.S. states seeks to block the proposed merger of carriers T-Mobile US and Sprint, filing a federal lawsuit here Tuesday that threatens to upend the long-sought plans of Sprint parent SoftBank Group.
The complaint filed in the Southern District of New York lists SoftBank as one of the defendants and seeks to permanently block the merger.
The 10 state attorneys general, led by New York's Letitia James and California's Xavier Becerra, allege that the merger would damage competition and drive up phone service prices.
"When it comes to corporate power, bigger isn’t always better," James said in a statement. "The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country."
The complaint hurt the stock prices of both carriers, with Sprint losing 6.8% and T-Mobile 1.6% in Tuesday's trading.
T-Mobile, Sprint and SoftBank did not immediately respond to requests for comment.
"This industry is already highly concentrated, with only four network providers," Avery Gardiner, senior fellow for competition, data and power at the Center for Democracy and Technology, said in a news release.
"Letting it consolidate to three providers would go against antitrust principles that have been developed over decades of merger reviews," she said. "Today, the states picked up the antitrust mantle and took action to protect competition and consumers."
The lawsuit comes after the U.S. Federal Communications Commission supported the merger last month, saying it would be "in the public interest." But the Justice Department has been reviewing the proposed deal from an antitrust standpoint and reportedly has criticisms of the integration.
Sprint presented itself as a vulnerable competitor in a letter sent to the FCC on April 15, detailing how the carrier giant could not survive as a standalone company. Sprint said its network lags those of rivals while the churn rate of customers is nearly twice that of Verizon, AT&T and T-Mobile, the other leading U.S. carriers.
The FCC support represented a crack in the regulatory wall SoftBank has encountered during its yearslong quest to marry Sprint with T-Mobile. The worst-case scenario for the Japanese group is the prospect of the merger falling through, leaving the parent to hold a company with no growth strategy. Sprint could need funding support from SoftBank, and the Japanese group risks booking major losses if the unit's asset value declined.
The group of attorneys general -- which also represents Colorado, Connecticut, Maryland, Michigan, Virginia, Wisconsin, Mississippi and Washington, D.C. -- allege that recent filings show Sprint has been attracting new subscribers and increasing its revenue, in contrast to the company's self-deprecating letter in April. Sprint also is "rapidly deploying 5G service" in the U.S., according to the court document.
FCC Chairman Ajit Pai has supported the merger based on the agency's goal of advancing U.S. leadership in fifth-generation wireless. But the attorneys general argued that the merger is not necessary for the two companies to deploy 5G network services in the U.S. because Sprint has already launched such mobile service in multiple locations. T-Mobile and Sprint each will offer their own 5G services in multiple markets soon even without a merger, the court document alleges.
AT&T, Sprint, T-Mobile and Verizon are the only companies in America possessing networks that can provide mobile wireless telecom services to over 90% of the U.S. population, the lawsuit said. The merger would eliminate "aggressive competition" from Sprint and give T-Mobile a bigger market share than AT&T or Verizon, which means T-Mobile will "no longer have incentives" to lower prices or improve quality, the lawsuit alleges.
The merger will cost Sprint and T-Mobile users over $4.5 billion annually, the court document claims, not including the deal's potential impact on 170 million customers served by AT&T or Verizon.