By Sinead Carew and Diane Bartz
NEW YORK/WASHINGTON D.C. | Tue May 31, 2011 5:08pm EDT
(Reuters) - Sprint Nextel has formally asked U.S. regulators to block AT&T Inc's proposed $39 billion purchase of T-Mobile USA, saying the deal "has no public interest benefit" and would harm competition even if it comes with conditions.
Sprint -- the most vocal opponent of the deal, which would create a new leader in the U.S. wireless market -- said that even if the Federal Communications Commission forced AT&T to divest assets as a condition, that would not be enough.
"The proposed transaction would produce no tangible public interest benefits and would impose serious anti-competitive harms that cannot be remedied through divestitures or conditions," Sprint said on Tuesday, the deadline for initial responses to AT&T's application to the FCC.
Smaller rival Leap Wireless and advocacy groups like Free Press have spoken out against the deal, as have many individual consumers in FCC filings.
On the flip side, AT&T said in a statement on Tuesday that it had support from groups including "community, civic and minority organizations," as well as 13 governors. The deal requires FCC and Justice Department approval.
AT&T argues that it needs T-Mobile USA's spectrum to expand high-speed services faster and improve its network performance, which has been criticized by consumers.
But Sprint, the No. 3 U.S. mobile operator, took issue with that argument, saying that AT&T has no lack of spectrum.
Instead Sprint said AT&T's problem is that it has "simply failed to upgrade or invest sufficiently in its network." It said AT&T already has enough spectrum to cover 97 percent of Americans with high-speed mobile services.
But Sprint argues that it may be come more difficult for consumers to pay for such services as smaller companies like itself would have less power to moderate service pricing after the deal as the two top carriers, AT&T and Verizon Wireless, would then control about 80 percent of the market.
Like Sprint, T-Mobile USA -- a unit of Deutsche Telekom -- tends to appeal to more cost conscious consumers than AT&T so the worry is that the cheaper prices would end up being phased out over time.
Sprint also argued in its lengthy filing with the FCC that AT&T's control of wireline assets such as connections to mobile broadcast towers would "exacerbate the anti-competitive effects of the takeover."
A merger of AT&T and T-Mobile USA would increase AT&T's share of the market to 44 percent from 32 percent, with Verizon continuing to hold 35 percent, according to Sprint, which estimated its own market share at 15 percent.
As a result, manufacturers would have less incentive to build mobile devices for Sprint after the deal because of its smaller scale, the company said in its filing.
Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc.
(Editing by Matthew Lewis and Steve Orlofsky)
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