A team of nine state attorneys general are challenging T-Mobile’s $26 billion merger with Sprint this month, arguing that combining the third- and fourth-largest wireless companies would lead to less competition and higher prices for customers.
The suit hinges on more than just the elimination of a competitor, says economist John Kwoka: It highlights a fundamental issue baked into the plan to merge the two companies.
According to the plan—which was approved by the United States Department of Justice and the Federal Communications Commission earlier this year—T-Mobile and Sprint can merge, but only if they help create a new major competitor out of a company that, so far, has no wireless operation: Dish Network Corp. This would add Dish to a field of wireless companies that includes AT&T, Verizon, and the new T-Mobile.
“What we’re seeing here is that the Department of Justice recognizes that going from four competitors to three wasn’t good for innovation,” says Kwoka, Neal F. Finnegan Distinguished Professor of Economics at Northeastern. “So, they had to bolster a fourth competitor, Dish. It’s pretty unusual stuff.”
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