States 'Entitled' to Injunction Blocking T-Mobile/Sprint, They Say in Closing Argument
Permitting T-Mobile to buy Sprint would defy the “loud and clear message” of Congress and courts to “trust competition,” said plaintiff states’ outside counsel, Glenn Pomerantz of Munger Tolles, in the bench trial’s closing argument Wednesday in U.S. District Court in the Southern District of New York. T-Mobile lawyer David Gelfand, with Cleary Gottlieb, countered that the states “fell far short” at trial of their “burden” of proving the deal would be anticompetitive. He said the transaction will do “exactly the opposite” and “greatly improve competition.”
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T-Mobile/Sprint is “presumptively illegal” because the share of the combined entity would exceed the 30 percent “threshold” established in case law for defining monopolistic transactions, said Pomerantz in lower Manhattan. Plaintiff experts testified at trial that T-Mobile/Sprint would control 37.8 percent of U.S. wireless subscribers and 34.4 percent of revenue, he said. Gelfand countered that the analysis ignored competition from cable and mobile virtual network operators. Pomerantz rebutted, saying the analysis was in keeping with DOJ/FTC transaction guidelines and that the defendants exaggerated the cable competition.
The deal would bring “unilateral and coordinated” harm to the public, said Pomerantz. History shows that a “high concentration” of players competing in a confined space “leads to parallel conduct” such as “signaling” promotional activity to competitors, he said. “That’s coordination.”
DOJ’s Dish Network “fix” is “inadequate to restore the competition” lost with the elimination of Sprint, said Pomerantz. Dish won’t meet the DOJ/FTC legal bar for becoming a viable wireless competitor in a “timely, likely and sufficient” manner, he said. Dish is missing the “critical ingredients” of experience, scale and brand to make a viable run as a wireless disruptor, said Pomerantz. Dish may be a successful satellite TV company, “but no customers ever heard of Dish as a wireless brand,” he said.
Pomerantz showed the court what he described as the cover page of a confidential Dish 5G “retail business plan” that Chairman Charlie Ergen produced in closed testimony Dec. 18. The plan contained “rosy” predictions for Dish’s 5G retail rollout the first three years if T-Mobile/Sprint is allowed to go forward, he said. “I can’t say in open court what Mr. Ergen said,” but “what he didn’t say is where any of those numbers came from,” said Pomerantz. “We have no idea if they are reasonable or pie-in-the-sky projections.” T-Mobile’s Gelfand rebutted that Pomerantz’s team passed on the opportunity to question Ergen about the forecasts.
The states are “entitled to an injunction” blocking the deal because “preserving competition is in the public interest,” said Pomerantz. The transaction would “substantially harm consumers” to the tune of $8.7 billion annually if prices don’t decline and $4.6 billion yearly in “unilateral price increases,” he said.
Gelfand countered that T-Mobile/Sprint will “lower prices to win share from the two largest competitors” in Verizon and AT&T. It also will use spectrum “held by Dish that would otherwise not be deployed,” he said.
The deal will yield a network with quality and speed “that are light years ahead of where T-Mobile and Sprint are,” said Gelfand. T-Mobile/Sprint combines two “extraordinarily complementary assets,” he said. They’re a “perfect fit” to “uniquely address 5G,” he said. The combined entity is “the best starting point with spectrum across all bands,” he said.
The combination will bring a “massive capacity increase that benefits consumers” at 15 times the speed of current wireless, said Gelfand. “Plaintiffs’ response is that consumers don’t want those faster speeds. History shows that when speeds increase, wonderful things happen.”
The burden “squarely stays” with the states to prove blocking the transaction would be in the public interest, said Gelfand. They failed to prove T-Mobile/Sprint would “lessen competition,” he said.
Bundling practices and “differentiated offerings” in the wireless industry would make post-deal coordination “challenging,” contrary to what states allege, said Gelfand. Wireless is a “very dynamic industry,” where pricing and promotional strategies aren’t always “transparent,” he said. Verizon “recognizes the threat” of the “new” T-Mobile, said Gelfand. “They aren’t coordinating, they’re getting ready to fight back.”
The court should have “a tremendous amount of comfort that prices will go down” post-deal, said Gelfand. “And we don’t have to prove they’ll go down.” T-Mobile/Sprint “holds a tremendous amount of promise,” he said.
The packed courtroom included T-Mobile CEO John Legere and New York Attorney General Letitia James (D) seated in the front row, albeit on opposite sides. James’ appearance prompted U.S. District Judge Victor Marrero to jokingly ask T-Mobile/Sprint attorneys if they were going to counter with Attorney General William Barr. As court adjourned, Marrero said he will “endeavor” to decide the case “as promptly as possible.”
States are “more likely than not to win, but it remains a close case,” New Street Research's Blair Levin wrote after leaving the courthouse. Closing arguments didn’t change the analyst's view, he said: The judge asked no questions, so each side repeated arguments from this month’s written filings (see 2001090023).