Sprint Merger With T-Mobile Will Hurt Customers, Economist Says
(Bloomberg) -- T-Mobile US Inc.’s takeover of Sprint Inc. would probably erode competition for U.S. wireless services and lead to higher prices for consumers, according to an antitrust expert hired by states that oppose the merger.
Carl Shapiro, an economics professor at the University of California at Berkeley, testified in a New York courtroom Wednesday that reducing the number of carriers could lead to a coordinated price increase of as much as $8.7 billion. If the deal is completed, T-Mobile alone could boost prices by $4.6 billion, he said.
Shapiro was called on the third day of a trial before U.S. District Judge Victor Marrero. While the deal was approved by federal regulators, several states including New York and California sued over antitrust concerns. They claim that combining the two biggest discounters among national carriers will erode pressure on market leaders AT&T Inc. and Verizon Communications Inc.
Prices have been the central theme of the trial that began Monday and may last two weeks.
On Monday, the states presented a text from Sprint marketing chief Roger Sole to then-Chief Executive Officer Marcelo Claure saying the deal could mean an increase of $5 a month in average revenue per subscriber. The next day, Tim Hoettges, the chairman of Deutsche Telekom AG, which controls T-Mobil, testified that wireless customers will see lower prices, even though the states say the company’s internal analysis portrayed the deal as a way to reduce competition and raise prices.
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.
In earlier testimony Wednesday, a Sprint executive said his company wouldn’t survive much longer without a proposed $26.5 billion takeover by T-Mobile, because it lacks the resources to upgrade its networks and has generally weak business prospects.
“Sprint would not be viable within the next two years,” Jay Bluhm, the vice president of network development and engineering, said Wednesday answering a question from the judge on Sprint’s future as a standalone.
Shapiro, the Berkeley economist, suggested Sprint’s prospects weren’t so bleak. Asked if the company would lose significant market share, he said, the “predictions don’t show anything of the like.”
The trial, which began Monday, is expected to last two weeks and will include testimony from T-Mobile Chief Executive Officer John Legere, Sprint Chairman Claure and Dish Network Corp. Chairman Charlie Ergen. Under a plan approved U.S. regulators, Dish will buy assets from Sprint and T-Mobile to set up a new wireless carrier.
The case is New York vs. Deutsche Telekom, U.S. District Court, Southern District of New York (Manhattan)
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