Courtroom drama heats up as DOJ nears decision on Sprint, T-Mobile

Companies face off in federal court Friday

By Brian Fung, CNN Business
Justin Sullivan/Getty Images; Joe Raedle/Getty Images

(CNN) - A highly anticipated verdict by the Justice Department on T-Mobile's proposed $26 billion merger with Sprint is taking longer than anticipated to resolve, according to a person familiar with the matter.

The decision isn't now expected until toward the end of next week, this person said. The timing reflects the complex negotiations between the companies and DOJ, which is pushing for T-Mobile and Sprint to spin off enough assets to reduce the government's antitrust concerns surrounding the potentially landmark telecom merger.

It also undercuts a widespread belief that an agreement between the Justice Department and the companies is "imminent," as Sprint attorney Steven Sunshine said in Manhattan federal court on Friday morning.

Sprint and T-Mobile are facing a multi-state challenge to block the deal, filed preemptively earlier this month.

"We are challenging this merger to protect a service that matters to everyone," said Massachusetts attorney general Maura Healey in a statement.

The two sides agreed that a trial could begin on Oct. 7 and last two to three weeks, though that timetable is subject to Judge Victor Marrero's approval.

The hearing marked the beginning of a critical test for the two wireless carriers. At stake is a $26 billion deal to combine the nation's third- and fourth-largest cellular providers, creating a massive new company with as many as 127 million customers.

Along with New York and California, attorneys general from Colorado, Maryland, Michigan, Mississippi, Connecticut, Virginia, Wisconsin and the District of Columbia initially signed onto the lawsuit. Speaking before Marrero on Friday, an attorney for New York announced that four additional states are joining the nine already named in the suit: Hawaii, Massachusetts, Minnesota and Nevada.

They argue the tie-up will ultimately lead to higher prices for consumers because it eliminates an aggressive competitor — Sprint — from the marketplace. The states allege that T-Mobile's controlling shareholder, Germany's Deutsche Telekom, has sought consolidation in the wireless network market believing it would lead to "less competition and better returns for network operators," according to the lawsuit, which cites internal Deutsche Telekom documents.

T-Mobile and Sprint have argued the merger is crucial to their ability to take on Verizon and AT&T, which owns WarnerMedia, the parent company of CNN.

The states appear committed to their lawsuit regardless of what DOJ concludes. Attorneys for the states said they may have to revise their complaint "to add additional allegations" if the Justice Department approves the merger with structural changes. The states could still seek to file a preliminary injunction against the deal "if necessary," said California Attorney General Xavier Becerra in a statement Friday.

Two additional states, Indiana and Texas, said in filings to the Federal Communications Commission on Thursday that they are investigating the merger, though they have not joined the lawsuit.

Both states are reviewing phone number portability data provided by the carriers to the FCC, according to their filings. Industry experts have said such data could provide evidence of how much T-Mobile and Sprint compete with one another for the same customers.

A key factor in DOJ's negotiations is whether the companies' divestments will be enough to spur renewed competition after Sprint is eliminated from the marketplace.

"The DOJ wants to assure that the divested assets go to a company that's going to put them to good use," said the person familiar with the matter.

In an op-ed Tuesday in USA Today, New York Attorney General Letitia James said T-Mobile and Sprint have injected competition into the wireless industry, leading to lower prices and better network quality.

"A merger between T-Mobile and Sprint would end competition between the two carriers with the greatest incentives to keep prices low and innovate," she wrote. "This isn't speculation but widely accepted economic theory."

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