Sprint Judge Questions Claim That Deal Would Hurt Customers
(Bloomberg) -- The federal judge who will decide whether T-Mobile US Inc. can move ahead with plans to buy Sprint Corp. expressed doubt that wireless companies would “be so bold” as to raise prices after the merger without also offering better service.
States that sued to halt the takeover on antitrust concerns say the deal would reduce competition among top carriers. An economist hired by the states testified Wednesday that wireless customers of the four biggest providers could see combined increases of as much as $8.7 billion, with $4.6 billion from T-Mobile alone.
But U.S. District Judge Victor Marrero in New York on Thursday told the professor it seemed counterintuitive that the companies would raise prices unilaterally and instead would charge more only if they offered service improvements.
“Isn’t that a more plausible scenario?” Marrero asked Carl Shapiro, an economics professor at the University of California at Berkeley who testifies in large antitrust cases.
Shapiro, a paid witness for states including New York and California, responded that his big worry was that wireless providers would stop all the service discounts that have become common thanks to the rivalry between Sprint and T-Mobile.
“The primary concern I’ve identified is not that they will raise prices, it’s that they’ll pull back from some of the price cuts or other initiatives,” Shapiro said. “There’s no real reputational harm if they sit back and don’t offer new deals.”
To win approval of the merger, T-Mobile has pledged to freeze prices for three years, offer free wireless broadband access to 10 million underserved students and roll out a new $15-a-month data plan capped at 2 gigabytes.
Also on Thursday, T-Mobile Chief Executive Officer John Legere took the stand as the first defense witness, testifying that his company has a long history of disrupting the wireless market.
“Every time we go public and talk about what we’re going to do, they are all permanent structural changes to the industry intended to make everybody else follow,” said Legere, 61, who donned a tie for the first time in seven years for his court appearance. The CEO is normally clad in his trademark magenta T-shirt and a blazer.
T-Mobile needs the Sprint merger because the carrier must expand its existing capacity and improve the network, especially with the planned build-out of next-generation technology known as 5G, Legere said.
The merger would triple the total amount of 5G capacity that the two companies would have on their own, and would boost data-transmission speeds 15-fold, the CEO said. “It’s like a car going from 35, 40 miles per hour to 600 miles per hour,” he said.
T-Mobile’s low-band spectrum and Sprint’s midband spectrum also will get a “geometric increase” from the merger, he said.
The trial, which began Monday, is expected to last two weeks and will also include testimony from Sprint Chairman Marcelo Claure and Dish Network Corp. Chairman Charlie Ergen.
Under a plan approved by U.S. regulators, Dish will buy assets from Sprint and T-Mobile to set up a new wireless carrier.
Legere said Dish stood out over prospective buyers Comcast Corp. and Charter Communications Inc. because Dish had become a “hoarder” of a “vast quantity of spectrum,” which had long frustrated the T-Mobile CEO.
“It’s like any other jealous child -- if you can look over at somebody else’s toys, you really wish you had them,” Legere said.
The case is New York vs. Deutsche Telekom, U.S. District Court, Southern District of New York (Manhattan)
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