Sprint Joins Antitrust Fight with New Lawsuit Against AT&T’s T-Mobile Bid

9/6/11Follow @curtwoodward

[Updated at 3:30 pm Pacific with details, AT&T response]
Sprint (NYSE: S) was already cheering the federal government’s antitrust lawsuit against competitor AT&T’s $39 billion bid to acquire Bellevue, WA-based T-Mobile USA. Now, the third-place U.S. wireless carrier is putting some skin in the game with its own, separate civil suit, filed today in federal court.

Sprint announced the lawsuit with this press release, and here’s a copy of the actual complaint. While the Justice Department’s lawsuit filing focused mostly on the potential losses for consumers, Sprint’s lawsuit delves into great detail about how a duopoly of Verizon and post-merger AT&T would affect the overall carrier business.

AT&T has responded with a public statement, saying it will “vigorously contest” the lawsuit. It accuses Sprint of being “more interested in protecting itself than it is in promoting competition that benefits consumers.”

As you’d expect, Sprint doesn’t paint a pretty picture. It calls AT&T’s bid for T-Mobile “brazenly anticompetitive,” and goes on to write that the deal “would eliminate one of four national competitors and marginalize a second (Sprint), pushing the market back toward a 1980s-style cell phone duopoly.” Throughout the lawsuit, Sprint recalls the bad old days of Ma Bell by referring to Verizon and AT&T as the “Twin Bells.”

Sprint, of course, reportedly wanted to buy T-Mobile itself earlier this year. But it argues that letting AT&T make the grab would concentrate power between AT&T and Verizon, and the latter company “would not have the incentive to constrain AT&T, and would have a substantially increased incentive to coordinate with AT&T rather than compete,” a charge that DOJ lawyers also raised last week.

Sprint worries that AT&T’s increased size would effectively lock up the market for new handsets, and it points to the fact that AT&T and Verizon are still the only carriers allowed to have the iPhone. “The Twin Bells have had a tremendous time-to-market advantage with the iPhone, and have been able to lock many customers into two-year contracts with the iconic device,” Sprint writes.

Sprint also says it could wind up paying more for “backhaul,” the connections that link cell towers back to switches and other network equipment, because a large share of that market is controlled by AT&T and Verizon. It also raises worries about higher prices for roaming on another carrier’s network, saying that larger AT&T would be able to raise prices for its GSM network, and put pressure on Verizon to charge more for roaming on its own CDMA network.

Kirkland, WA’s Clearwire (NASDAQ: CLWR), the troubled broadband provider majority-owned by Sprint, also gets a shout-out (but not in a good way). Sprint says that if AT&T is allowed to buy up T-Mobile spectrum that already has been developed for the market, it will put holders of new spectrum at a disadvantage and shift the cost of developing those assets to companies like Sprint.

“Lightsquared and Clearwire have spectrum but need development partners to build a network and provide the other attributes necessary to be able to offer wireless service,” Sprint wrote. “The transaction would eliminate T-Mobile as an independent carrier that could license spectrum or otherwise purchase network services.”

The case has been assigned to U.S. District Judge Ellen Huvelle, the same judge who has the U.S. government’s case against AT&T. Cases that are so closely related can often be consolidated, but that hasn’t happened in this instance—Sprint’s filing just hit the courts today.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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