New York (dpa) - This process would have gladly spared the German Telekom: From today in Manhattan in court is negotiating whether the US subsidiary of the Bonn Group may merge with the rival Sprint. There is a billion-dollar deal at stake, which has enormous significance not only for Telekom.
The process paves the way for the future of the US mobile market and could create new legal risks for acquisitions and mergers in the world's largest economy. The process is expected in the US with great excitement, even telecom boss Tim Höttges and T-Mobile boss John Legere should testify as important witnesses.
Telekom has been trying for years to bring its daughter T-Mobile US together with Sprint, but the antitrust resistance in the USA is high. In the third attempt, the $ 26 billion merger finally seemed to work, but then some US states straddled it. The alliance is led by New York's powerful Attorney General Letitia "Tish" James and her counterpart Xavier Becerra from California. In addition, complain Connecticut, Maryland, Michigan, Virginia, Wisconsin, Hawaii, Massachusetts, Illinois, Oregon, Minnesota, Pennsylvania and Washington DC.
States fear that the merger of the third and fourth largest providers in the US telephone market will severely restrict competition, resulting in less choice and price increases. The fact that the Department of Justice in Washington had given the go-ahead for the wedding of mobile phones under conditions and agreed to the industry regulator FCC, impressed the alliance of plaintiffs little. "The mega-merger remains a bad deal for consumers and employees," prosecutor James announced.
The Telekom considers the fears unfounded and refers to the far-reaching concessions that had already been made to the antitrust officers by the Ministry of Justice. Here, the July compromise, in addition to a strong commitment to 5G network expansion, saw the sale of comprehensive business parts and radio frequencies to satellite TV operator Dish. This is to prevent the competition from suffering. The opponents of the merger, however, do not believe that succeeds. Dish Chef Charlie Ergen must therefore explain as a key witness in the process, as his company is quasi from the state to become the new fourth force in the US mobile market.
For Telekom, the showdown in New York could be the last chapter in a story that has kept the Bonn people going for years. As early as 2014, T-Mobile and Sprint wanted to merge, which already failed due to antitrust concerns. In another attempt, the Telekom and the Sprint majority shareholder Softbank could not agree on price and ownership. The current plan has been in place since 2018, and corporations have great hopes for US President Donald Trump after the change of power in Washington. His government also agreed, but the states are transversely.
This makes the case politically explosive. That regional prosecutor's offices turn against antitrust decisions at the federal level, is very unusual. In this case, not only does the telecom get caught between the fronts of Washington and the trumpeting coastal states of New York and California, but also the hardened party lines. All the plaintiffs' prosecutors are Democrats - to thwart a merger allowed by the Republican government would mean victory in a major showdown.
Should the states succeed in blocking the merger, this would have far-reaching implications for US antitrust law as a whole. From then on, companies would have to take into account a completely new risk factor in mergers and acquisitions. A judgment against the merger would be a great success for Verizon and AT & T, who dominate the US market as top dogs so far. For T-Mobile US a failure would be bitter after years of effort, but it would be menacing, according to analysts only for the smaller fusion partner Sprint. The company is heavily leveraged and could become another major problem for the Softbank conglomerate after flops at WeWork and Uber.
The planned merger has enormous dimensions. T-Mobile and Sprint previously said combined combined sales would reach more than 127 million customers, with over $ 70 billion in combined annual revenue. T-Mobile recently had a market value of 67 billion dollars, Sprint brought it to just under 23 billion. The Telekom calculates because of lower costs such as network expansion with savings of more than six billion dollars annually. The merger is to take place via a share exchange, the Telekom wants to take over with 42 percent, the largest share in the merged company. The stock package that Sprint shareholders are to receive in exchange for their shares was worth well over $ 26 billion at the announcement of the merger.
The trial of Judge Victor Marrero is scheduled to take two weeks, but given the mass of witnesses and evidence, an extra time would be unsurprising. Marrero's verdict is likely to be delayed after the court hearings.