AT&T Notches a Small Win in Sprint’s Suit Against T-Mobile Deal

Yesterday, a U.S. district judge in a ruling allowed Sprint (NYSE:S) and C Spire to pursue part of their antitrust lawsuit claims against AT&T’s (NYSE:T) proposed $39 billion acquisition of T-Mobile ^[1]. At first glance, it’s unclear who wins in this case, but as we look deeper, it looks like small victory for AT&T. While the ruling allows Sprint to pursue their claim on how the deal impacts the market for wireless devices, we believe the ruling dismisses the remaining claims, which include the claims that the deal would hurt the market for wireless airwaves and the market for backhaul services, links between the core network and more remote locations.

See our complete analysis for AT&T stock here

Sprint’s initial argument against AT&T’s proposed deal

When Sprint initially filed its lawsuit in early September to block AT&T/T-Mobile deal, it had argued that the deal would make the U.S. wireless market an effective duopoly, and one of the effects would be that Sprint would not have access to the best wireless handsets, an important parameter in attracting subscribers in the U.S. telecom market (see Sprint Jumps on the Dog Pile and Sues AT&T).

The judge’s ruling could be perceived as a win for AT&T

Although the judge’s ruling has allowed Sprint to pursue this case, we believe that after the addition of Apple (NYSE:AAPL) iPhone to its portfolio of devices, its argument against the deal has actually weakened. Before the launch of iPhone 4S, we looked at  this topic in our note titled AT&T May Benefit the Most from Sprint’s iPhone Deal.

This is the only claim that the judge has allowed Sprint to pursue while dismissing others. Hence in totality we believe that this ruling is actually a win for AT&T. Our $38 price estimate for AT&T stock is about 30% above market price.

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1. Judge allows Sprint suit against AT&T/T-Mobile deal, Reuters, November 2nd, 2011 [↩]