Another Carrier Sues AT&T, Joins Effort To Stop T-Mobile Merger

AT&T (NYSE: T) is reportedly luring small players to support its merger with T-Mobile with promises to sell them prized spectrum. The make-nice effort appears to have failed with at least one of the minnow carriers after Cellular South yesterday joined the litigation parade to stop the merger.

In its filing in DC federal court, the country’s ninth biggest wireless carrier repeated arguments made by Sprint (NYSE: S) to oppose the merger. In particular, Cellular South claims that removing T-Mobile from the competitive space will give AT&T and Verizon a stranglehold over the supply of new customer devices. The small company is effectively saying, “It’s already hard enough getting smartphone makers to tailor their devices for us-after the merger, there is no chance we will have a chance to sell the cool (and profitable) iPhone and Droid phones that customers love.”

Cellular South, which serves about 900,000 customers in Mississippi and neighboring states, also argues that it will be hard-pressed to obtain roaming agreements-which allow carriers to offer cross-country calling-if T-Mobile disappears from the scene. This is because Cellular South’s GSM network technology is only compatible with T-Mobile and AT&T. The company also claims that rural customers, which are its base, will get the short end of the stick if the merger goes through.

Taken together, Cellular South’s complaints echo not only those of Sprint but of state governments who claim that T-Mobile’s presence is essential to preserve competition. New York’s attorney general, for instance, has argued that T-Mobile currently provides an irreplaceable low-cost option for millions of people in the state.

New York, California and Ohio are among the seven states who have so far joined the federal government in opposing the merger. Eleven other states, mostly in the south, have reportedly come out in favor of the deal. The federal judge overseeing the case is expected to begin scheduling court arguments later this week.

Here is the current breakdown of wireless subscribers according to Cellular South’s filing:

Verizon: 106,292,000
AT&T: 98,615,000
Sprint: 51,843,000
T-Mobile: 33,585,000
MetroPCS: 9,080,000
Clearwire: 7,648,000
US Cellular: 5,968,000
Leap: 5,746,000
Cellular South: 887,000
ATN: 639,000
Cincinnati Bell: 487,000
NTELOS: 425,000