Carriers

Not so fast, AT&T! U.S. Justice Department sues to block T-Mobile merger.

August 31, 2011 | by Andrew Kameka

AT&T, T-Mobile

doj-att-tmobile

The United States Justice Department has officially come out against AT&T’s proposed acquisition of T-Mobile’s USA unit. Citing concerns about a lack of competition that would result from the merger, the Justice Department has filed a lawsuit seeking a court order to block the deal from taking place.

Bloomberg News was first to discover the filing and note that the government argues, “AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market.”

United States antitrust law prevents actions that would give one company too much control or the potential to be anti-competitive in one particular industry or market. The JD says such a situation would play out if AT&T is allowed to purchase T-Mobile USA from its German parent company Deutsche Telekom for $39 billion.

This does not mean that AT&T-Mobile won’t happen. The JD seeks an injunction, but a judge could deny the request and allow the deal to be considered by the FCC for approval.

AT&T has previously faced opposition from legislators, consumer advocacy groups, and Internet comment section vigilantes. U.S. v. AT&T Inc., is the first instance of a government agency on record of opposing the deal. Third-place carrier Sprint has been a vocal critic of the proposed acquisition as it would eliminate one of the most affordable carriers and put Sprint in last place among the major carriers.

Unless AT&T manages to win both this lawsuit and approval for its acquisition of T-Mobile, the company will have to pay Deutsche Telekom $7 billion in cash and service discounts.

UPDATE:

Not looking good for AT&T. Below are statements from  AT&T, the FCC, and Sprint about today’s filing.

By filing suit today, the Department of Justice has concluded that AT&T’s acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws. Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices.

- Julius Genachowski, FCC Chairman

We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated.

We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.

At the end of the day, we believe facts will guide any final decision and the facts are clear. This merger will:

Help solve our nation’s spectrum exhaust situation and improve wireless service for millions.
Allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans, or 97% of the population;
Result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.

We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.

-  Wayne Watts, AT&T Senior Executive Vice President and General Counsel

The DOJ today delivered a decisive victory for consumers, competition and our country. By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision – one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.

- Vonya B. McCann, Sprint SVP of Government Affairs