In AT&T antitrust case, don’t forget about Sprint

December 9, 2011

The Justice Department’s case seeking to block AT&T’s $39 billion acquisition of Deutsche Telekom’s T-Mobile is rocketing toward a Feb. 13 trial date. AT&T has everything riding on either a win at trial or a settlement that satisfies DOJ’s concerns about the combined entity’s dominance in nationwide wireless markets; as On the Case has reported, AT&T withdrew its application for Federal Communications Commission approval of the merger after the FCC announced it wanted an administrative law judge to consider the agency’s problems with the proposed deal. AT&T and T-Mobile are apparently betting that they’ll be able to come back to the FCC with a stronger case after they’ve appeased (or vanquished) the Justice Department.

But there’s another potential roadblock. Sprint Nextel Corporation and two regional wireless companies have also filed a suit to bar the AT&T/T-Mobile merger. At a hearing Friday in Washington, D.C., federal court, U.S. District Judge Ellen Huvelle will consider two very different scenarios for when Sprint’s case should be heard. Her answer will determine whether Sprint and its lawyers at Skadden, Arps, Slate, Meagher & Flom will get a shot at stopping the deal.

AT&T, represented by Kellogg, Huber, Hansen, Todd, Evans & Figel and Haynes and Boone, said as recently as Wednesday that it fully intends to complete the merger, although the company’s CFO declined to answer reporters’ questions about talks with the Justice Department. Meanwhile, the special master overseeing discovery in the DOJ suit indicated in a ruling Wednesday that AT&T’s withdrawal of its FCC application won’t affect the pretrial process. (The Justice Department had taken the opportunity of a third party’s bid to quash an AT&T subpoena to ask AT&T about its intentions; AT&T, according to the ruling, “responds that the recent events with the FCC proceeding have not altered the posture or timelines in the instant case.”)

Sprint originally wanted to consolidate its case with the Justice Department’s, but Huvelle denied that motion. She did, however, rule last month that Sprint could proceed with some of its antitrust claims. So in a filing this week in advance of Friday’s hearing, Sprint argued that Huvelle should hear its case immediately after the conclusion of the DOJ trial in February, taking advantage of discovery from that case. “Plaintiffs contemplate a streamlined trial in which evidence admitted in the DOJ trial would be deemed admitted in the private actions,” Sprint said in a joint case-management report. “Trial could start on the earliest available date following the close of evidence in the DOJ action. Plaintiffs’ proposal would greatly limit the need for live witnesses, narrow the fact issues to be resolved, and require significantly less of the court’s time than trial of the DOJ action.”

AT&T, however, has a different view of when the Sprint trial should be heard. It’s asking Huvelle to conduct Sprint discovery on a separate track from the Justice Department, and to postpone the Sprint trial until the second half of 2012 — after the scheduled close of the T-Mobile deal. Sprint, as you might imagine, doesn’t think much of AT&T’s proposal. “Defendants in effect are asking the court to allow [them] to close the transaction and ‘scramble the eggs’ of AT&T and T-Mobile prior to plaintiffs having their day in court,” Sprint argued. “It could prevent plaintiffs from ever obtaining an effective remedy.”

In the Sprint plan, its trial would take place as the FCC considers a revised AT&T application. Of course, unless AT&T gets past the DOJ neither the FCC nor Sprint will have to proceed.

Skadden referred my call to a Sprint spokesman who declined comment. AT&T and T-Mobile counsel Michael Kellogg of Kellogg Huber also declined comment. T-Mobile also has lawyers from Cleary, Gottlieb, Steen & Hamilton and Wiley Rein in the antitrust litigation.

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One of the most interesting questions a Washington, D.C., federal judge will consider at Friday’s hearing in the litigation challenging AT&T’s proposed $39 billion merger with T-Mobile is when Sprint — the AT&T competitor that’s also suing to block the deal — should have its say
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