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Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 1 of 13
`
` UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
`
`Case No.
`
`Filed:
`
`UNITED STATES OF AMERICA,
`Department of Justice, Antitrust Division
`450 5th Street, N.W.
`Washington, D.C. 20530
`
`STATE OF KANSAS,
`120 S.W. 10th Avenue, 2nd Floor
`Topeka, Kansas 66612-1597
`
`STATE OF NEBRASKA,
`2115 State Capitol
`Lincoln, Nebraska 68509
`
`STATE OF OHIO,
`150 East Gay Street, 22nd Floor
`Columbus, Ohio 43215
`
`STATE OF OKLAHOMA,
`313 N.E. 21st Street
`Oklahoma City, Oklahoma 73105-4894
`
`and
`
`STATE OF SOUTH DAKOTA,
`1302 E. Highway 14, Suite 1
`Pierre, South Dakota 57501-8501
`
`Plaintiffs,
`
`v.
`
`DEUTSCHE TELEKOM AG,
`Friedrich-Ebert-Allee 140
`Bonn, Germany 53113
`
`T-MOBILE US, INC.,
`12920 SE 38th Street
`Bellevue, Washington 98006
`
`SOFTBANK GROUP CORP.
`1-9-1 Higashi-shimbashi, Minato-ku,
`Tokyo, Japan 105-7303
`
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 2 of 13
`
`
`and
`
`SPRINT CORPORATION
`6200 Sprint Parkway, Overland Park,
`Kansas 66251-4300
`
`
`
`
`
`
`
`
`
`Defendants.
`
`
`
`
`
`COMPLAINT
`
`The United States of America and the States of Kansas, Nebraska, Ohio, Oklahoma, and
`
`South Dakota (“Plaintiff States”) bring this civil antitrust action to prevent the merger of T-
`
`Mobile and Sprint, two of the four national facilities-based mobile wireless carriers in the United
`
`States. The United States and Plaintiff States allege as follows:
`
`
`
`
`
`I. NATURE OF THE ACTION
`
`1.
`
`Mobile wireless service is an integral part of modern American life. The average
`
`American household spends over $1,000 a year on mobile wireless service, not including the
`
`additional costs of wireless devices, applications, media content, and accessories. Many
`
`Americans now rely on mobile wireless service to communicate, pay bills, apply for jobs, do
`
`schoolwork, get directions, shop, read the news, and otherwise stay informed and connected
`
`from nearly any location in the country.
`
`
`
`2.
`
`Competition has kept mobile wireless service prices down and served as a catalyst
`
`for innovation. Preserving this competition is critical to ensuring that consumers will continue to
`
`have reasonable and affordable access to an essential service that, for many, serves as a gateway
`
`to the modern economy.
`
`
`
`2
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 3 of 13
`
`
`
`3.
`
`By combining two of the only four national mobile facilities-based wireless
`
`carriers, without appropriate remedies, the merger of T-Mobile and Sprint would extinguish
`
`substantial competition.
`
`
`
`4.
`
`As the nation’s third and fourth largest mobile wireless carriers, T-Mobile and
`
`Sprint have positioned themselves as challengers to Verizon and AT&T, their larger and more
`
`expensive rivals, targeting retail customers who particularly value affordability. Some of these
`
`customers purchase mobile wireless service on a postpaid basis and are billed monthly after
`
`receiving service. Others, including those who may lack ready access to credit, purchase prepaid
`
`mobile wireless service and pay for service in advance of using it.
`
`
`
`5.
`
`The merger would eliminate Sprint as an independent competitor, reducing the
`
`number of national facilities-based mobile wireless carriers from four to three. The merger
`
`would cause the merged T-Mobile and Sprint (“New T-Mobile”) to compete less aggressively.
`
`Additionally, the merger likely would make it easier for the three remaining national facilities-
`
`based mobile wireless carriers to coordinate their pricing, promotions, and service offerings. The
`
`result would be increased prices and less attractive service offerings for American consumers,
`
`who collectively would pay billions of dollars more each year for mobile wireless service.
`
`
`
`6.
`
`Because the merger of T-Mobile and Sprint likely would substantially lessen
`
`competition for retail mobile wireless service, the Court should permanently enjoin the proposed
`
`transaction.
`
`
`
`
`
`II. THE PARTIES AND THE PROPOSED MERGER
`
`7.
`
`Deutsche Telekom AG (“Deutsche Telekom”) is a German corporation
`
`headquartered in Bonn, Germany, and is the controlling shareholder of T-Mobile US, Inc. (“T-
`
`Mobile”), with 63% of T-Mobile’s shares. Deutsche Telekom is the largest telecommunications
`
`3
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 4 of 13
`
`operator in Europe, with net revenues of €75.7 billion (approximately $85 billion) in 2018.
`
`
`
`8.
`
`T-Mobile is a Delaware corporation headquartered in Bellevue, Washington, and
`
`is the third largest mobile wireless carrier in the United States. In 2018, T-Mobile had nearly 80
`
`million wireless subscribers, and approximately $43.3 billion in total revenues. T-Mobile sells
`
`postpaid mobile wireless service under its T-Mobile brand, and prepaid mobile wireless service
`
`primarily under its Metro by T-Mobile brand. T-Mobile also sells mobile wireless service
`
`indirectly through mobile virtual network operators (“MVNOs”), such as TracFone and Google
`
`Fi, that lack wireless networks of their own. These MVNOs obtain network access from T-
`
`Mobile and resell mobile wireless service to consumers.
`
`9.
`
`SoftBank Group Corp. (“SoftBank”), a Japanese corporation and the controlling
`
`shareholder of Sprint, owns 85% of Sprint’s shares. SoftBank’s operating income during its
`
`2018 fiscal year was ¥2.3539 trillion (approximately $21.25 billion).
`
`10.
`
`Sprint Corporation (“Sprint”) is a Delaware corporation headquartered in
`
`Overland Park, Kansas. It is the fourth largest mobile wireless carrier in the United States. At
`
`the end of its 2018 fiscal year, Sprint had over 54 million wireless subscribers, and its fiscal year
`
`2018 operating revenues were approximately $32.6 billion. Sprint sells postpaid mobile wireless
`
`service under its Sprint brand, and prepaid mobile wireless service primarily under its Boost
`
`Mobile and Virgin Mobile brands. Sprint also sells mobile wireless service indirectly through
`
`MVNOs, which resell the service to consumers.
`
`11.
`
`On April 29, 2018, T-Mobile and Sprint agreed to combine their respective
`
`businesses in an all-stock transaction, pursuant to a Business Combination Agreement. The
`
`merged firm would be owned 42% by Deutsche Telekom and 27% by SoftBank.
`
`
`
`4
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 5 of 13
`
`III. INDUSTRY OVERVIEW AND RELEVANT MARKETS
`
`A.
`
`Industry Overview
`
`12. Mobile wireless service includes voice, text messaging, and data service used to
`
`access the internet from a mobile device. Consumers access these services through a variety of
`
`devices, including phones, tablets, and smart watches. Mobile wireless carriers compete for
`
`retail customers by offering a variety of service plans and devices at a variety of prices.
`
`13. Mobile wireless carriers deliver service over certain frequencies of spectrum. To
`
`build a national wireless network and become a facilities-based wireless carrier, a firm must
`
`acquire licenses to a sufficient amount of spectrum across a sufficiently wide geographic
`
`footprint. The firm also must deploy network infrastructure—including cell sites, radio
`
`transmitters and receivers, and equipment to transmit (or “backhaul”) signals to a core network—
`
`to transmit and receive signals over its licensed spectrum. The firm also must invest in building
`
`a distribution network and marketing its services to retail customers. Facilities-based mobile
`
`wireless carriers like T-Mobile and Sprint promote their prices, plan features, device offerings,
`
`customer service, and network quality as they compete for retail customers. MVNOs typically
`
`do not operate their own mobile wireless networks. Instead, these providers buy capacity
`
`wholesale from facilities-based providers like T-Mobile and Sprint and then resell mobile
`
`wireless service to consumers under their own brand name.
`
`B.
`
`14.
`
`Retail Mobile Wireless Service Is a Relevant Product Market
`
`Retail mobile wireless customers include consumers and small and medium
`
`businesses who use mobile wireless service for voice communications, text messaging, and
`
`internet access. These customers purchase mobile wireless service at retail stores or online, and
`
`choose from pricing and service plans made available to the general public. Retail customers are
`
`5
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 6 of 13
`
`distinct from large business and government customers, who purchase mobile wireless service
`
`through a bid process and receive different pricing than that available to the general public. A
`
`hypothetical monopolist of retail mobile wireless service profitably could raise prices by at least
`
`a small but significant, non-transitory amount. Accordingly, retail mobile wireless service is a
`
`relevant product market under Section 7 of the Clayton Act, 15 U.S.C. § 18.
`
`The United States Is a Relevant Geographic Market
`
`C.
`
`15. Mobile wireless carriers generally price, advertise, and market their services on a
`
`nationwide basis. Consumers who seek mobile wireless service in the United States cannot turn
`
`to carriers who do not provide service in the United States. A hypothetical monopolist of retail
`
`mobile wireless service in the United States profitably could raise prices by at least a small but
`
`significant, non-transitory amount. Thus, the United States is a relevant geographic market
`
`under Section 7 of the Clayton Act, 15 U.S.C. § 18.
`
`IV. ANTICOMPEITITVE EFFECTS
`
`
`The proposed merger would substantially lessen competition and harm consumers
`
`
`
`16.
`
`in the relevant market. Post-merger, the combined share of T-Mobile and Sprint would account
`
`for roughly one-third of the national retail mobile wireless service market, leaving only two other
`
`national wireless carriers of roughly equal size (AT&T and Verizon).
`
`
`
`17.
`
`American consumers, including those who are customers of Verizon and AT&T,
`
`have benefitted from the competition T-Mobile and Sprint have brought to the mobile wireless
`
`industry. For instance, it was not until after T-Mobile and Sprint introduced unlimited data plans
`
`to retail customers in 2016 that Verizon and AT&T followed with their own standalone
`
`unlimited data offerings to retail customers in 2017.
`
`6
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 7 of 13
`
`18.
`
`T-Mobile and Sprint have been particularly intense competitors for the roughly
`
`30% of retail subscribers who purchase prepaid mobile wireless service. These customers tend
`
`to be even more value conscious, on average, than postpaid subscribers.
`
`19.
`
`The head-to-head competition between T-Mobile’s Metro brand and Sprint’s
`
`Boost Mobile brand has exerted significant downward pressure on prices. When Boost
`
`introduced a family plan of four lines for $100 in February 2017, Metro countered with an
`
`aggressive promotion that a Sprint executive described this way: “We gave them a jab and they
`
`punched back with a left hook.” In the fall of 2017, when Metro responded to a Boost four lines
`
`for $100 promotion with a three lines for $90 promotion of its own, Boost executives countered
`
`with a “Metro attack plan.” Boost’s “Combat Metro” strategy upped the ante further by offering
`
`five lines for $100. Observing in March 2018 that Sprint postpaid and prepaid plans were priced
`
`50% lower than the competition, the senior leadership at T-Mobile’s Metro reduced prices to $40
`
`per month and then to $30 per month for entry level plans.
`
`20.
`
`The competition between T-Mobile and Sprint also has led to improvements in
`
`the quality of devices and the plan features available to prepaid subscribers. As one Sprint senior
`
`executive observed in 2015, “The prepaid space is experiencing a severe price war. We now
`
`have two competitors (Cricket and Metro) spending at postpaid-like advertising levels with
`
`strong, best in class nation-wide networks. We need to find ways to differentiate our service
`
`beyond device and rate plan price.” To “one up Metro” in May 2017, for example, Boost offered
`
`unlimited calling to Mexico and unlimited voice roaming to customers traveling in Mexico. That
`
`same year, Boost introduced its “BoostUp!” program, which allowed prepaid customers with a
`
`solid payment history to purchase a phone for $1 down and pay for it over 18 months with no
`
`7
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 8 of 13
`
`interest. And in February 2018, Boost offered an iPhone 6 for $49 to customers who switched to
`
`Boost and kept their phone number.
`
`21.
`
`If the merger were allowed to proceed, this competition would be lost. After the
`
`elimination of Sprint, the industry’s low-price leader, New T-Mobile would have the incentive
`
`and the ability to raise prices. In a post-merger world, the other remaining national facilities-
`
`based mobile wireless carriers, Verizon and AT&T, also would have the incentive and the ability
`
`to raise prices. Additionally, the merger would leave the market vulnerable to increased
`
`coordination among these three competitors. Increased coordination harms consumers through a
`
`combination of higher prices, reduced quality, reduced innovation, and fewer choices.
`
`22.
`
`Competition between Sprint and T-Mobile to sell mobile wireless service
`
`wholesale to MVNOs has benefited consumers by furthering innovation, including the
`
`introduction of MVNOs with some facilities-based infrastructure. The merger’s elimination of
`
`this competition likely would reduce future innovation.
`
`V.
`
`ABSENCE OF COUNTERVAILING FACTORS
`
`
`
`23.
`
`Given the high barriers to entry in the retail mobile wireless service market, entry
`
`or expansion of other firms is unlikely to occur in a timely manner or on a scale sufficient to
`
`replace the competitive influence now exerted on the market by Sprint.
`
`
`
`24.
`
`Any efficiencies generated by this merger are unlikely to be sufficient to offset
`
`the likely anticompetitive effects on American consumers in the retail mobile wireless service
`
`market, particularly in the short term, unless additional relief is granted.
`
`VI. JURISDICTION AND VENUE
`
`
`
`25.
`
`The United States brings this action, and the Court has subject matter jurisdiction
`
`over this action, under Section 15 of the Clayton Act, 15 U.S.C. § 25, to prevent and restrain
`
`8
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 9 of 13
`
`Defendants Deutsche Telekom, Softbank, T-Mobile, and Sprint (“Defendants”) from violating
`
`Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18.
`
`
`
`26.
`
`The Plaintiff States bring this action under Section 16 of the Clayton Act, 15
`
`U.S.C. § 26, to prevent and restrain the Defendants from violating Section 7 of the Clayton Act,
`
`15 U.S.C. § 18. The Plaintiff States, by and through their respective Attorneys General, bring
`
`this action as parens patriae on behalf of and to protect the health and welfare of their citizens
`
`and the general economy of each of their states.
`
`
`
`27.
`
`T-Mobile and Sprint are engaged in, and their activities substantially affect,
`
`interstate commerce. T-Mobile and Sprint sell mobile wireless service throughout the United
`
`States. As parties to the Business Combination Agreement, which will have effects throughout
`
`the United States, Deutsche Telekom and Softbank have submitted to the jurisdiction of the
`
`United States. All four of the Defendants have consented to venue and personal jurisdiction in
`
`this District.
`
`
`
`28.
`
`Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28
`
`U.S.C. § 1391(b) and (c)(2), for Defendants T-Mobile and Sprint, and venue is proper for
`
`Defendants Deutsche Telekom, a German corporation, and SoftBank, a Japanese corporation,
`
`under 28 U.S.C. § 1391(c)(3).
`
`VII. VIOLATION ALLEGED
`
`
`
`29.
`
`The merger of T-Mobile and Sprint likely would lessen competition substantially
`
`in interstate trade and commerce in the relevant geographic market for retail mobile wireless
`
`service, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
`
`
`
`30.
`
`Unless enjoined, the transaction likely would have the following effects in the
`
`national retail mobile wireless market described above:
`
`9
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 10 of 13
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`a.
`
`b.
`
`competition would be lessened substantially; and
`
`prices likely would be higher, quality of service likely would be lower,
`
`innovation likely would be lessened, and consumer choice likely would be
`
`more restricted than in the absence of the merger.
`
`VIII. REQUEST FOR RELIEF
`
`31.
`
`Plaintiffs request that this Court do the following:
`
`
`
`
`
`
`
`
`
`a.
`
`adjudge the combination of T-Mobile and Sprint’s mobile wireless
`
`businesses to violate Section 7 of the Clayton Act, 15 U.S.C. § 18;
`
`b.
`
`permanently enjoin T-Mobile and Sprint from carrying out the Business
`
`Combination Agreement dated April 29, 2018, or from entering into or
`
`carrying out any agreement, understanding, or plan, the effect of which
`
`would be to bring the mobile wireless businesses of T-Mobile and Sprint
`
`under common ownership or control;
`
`award Plaintiffs costs of this action; and
`
`award Plaintiffs other relief as the Court may deem just and proper.
`
`c.
`
`d.
`
`Dated this 26th day of July, 2019
`
`
`
`10
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 11 of 13
`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 11 of 13
`
`
`
`Respectfully subm' ed,
`
`
`
`
`
`
`
`ATES OF AMERICA:
`
` Makan Delra im
`
`
`
`
`
`
`
`
`
`
`
`Assistant Attorney General for Antitrust
`
`
`
` rederick S.
`
`
`
`
`
`
`
`oung (
`Patricia C. Corcoran
`
`
`
`
`
`
`Matthew R. Jones
`
`
`
`
`
`
`
`
`Attorneys for the United States
`
`
`
`
`
`
`US. Department of Justice
`Antitrust Division
`
`
`
`
`
`
`
`450 Fifth Street NW, Suite 7000
`
`
`
`Washington, DC 20530
`
`
`Telephone: (202) 514-5 621
`
`
`
`Facsimile: (202) 514—6381
`
`Email: Frederick.Young@usdoj.gov
`
`
`
`
`
`
`
`
`
`M Mr.
`
`
`
`
`
`
`Bernard A. Nrgro, Jr. (D.C. Bar #412357)
`
`
`
`
`Deputy Assistant Attorney General
`
`
`
`Y?
`
`Patricia A. Brink
`
`
`
`Director of Civil Enforcement
`
`
`
`
`
`
`
`4/.
`
`
`
`
`
`
`.
`. Bar #996525)
`David . Shaw (
`
`
`
`
`
`Counsel to the Assistant Attorney General
`
`
`
`at, % Lt
`
`
`
`
`
`
`AndrewJ.
`. Robinson (DC. Bar #1003 748)
`
`
`
`
`
`
`Counsel to the Assistant Attorney General
`
` awrenc A. Reicher
`
`
`
`
`
`
`
`
`
`Counsel to the Assistant Attorney General
`
`
`
`flfljw
`
`
`
`
`
`
`Scott Scheele (D.C. Bar #429061)
`
`
`
`
`Chief, Telecommunications & Broadband Section
`
`
`
`
`
`
`
`
`Aszstant Chief, Telecommunications & Broadband Section
`
`
`
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`
`
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`
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 12 of 13
`
`FOR PLAINTIFF STATE OF KANSAS:
`
`
`
`
`Derek Schmidt
`Attorney General
`State of Kansas
`120 S.W. 10th Avenue, 2nd Floor
`Topeka, Kansas 66612-1597
`(785) 296-2215
`
`
`FOR PLAINTIFF STATE OF NEBRASKA:
`
`
`
`Douglas J. Peterson
`Attorney General
`State of Nebraska
`2115 State Capitol
`Lincoln, Nebraska 68509
`(402) 471-3811
`
`
`FOR PLAINTIFF STATE OF OHIO:
`
`
`
`Dave Yost (0056290)
`Attorney General
`State of Ohio
`150 E. Gay St., 22nd Floor
`Columbus, Ohio 43215
`(614) 466-4328
`
`
`
`12
`
`
`

`

`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 13 of 13
`
`FOR PLAINTIFF STATE OF OKLAHOMA:
`
`
`
`
`
`Mike Hunter
`Attorney General of Oklahoma
`313 N.E. 21st Street
`Oklahoma City, Oklahoma 73105-4894
`(405) 521-3921
`
`
`FOR PLAINTIFF STATE OF SOUTH DAKOTA:
`
`
`
`
`Jason R. Ravnsborg
`Attorney General
`State of South Dakota
`1302 E. Highway 14, Suite 1
`Pierre, SD 57501-8501
`(605) 773-3215
`
`13
`
`
`

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