Justice Department Files Suit to Block $39 Billion AT&T, T-Mobile Deal

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The Justice Department filed suit Wednesday to block AT&T's $39 billion deal to buy T-Mobile USA on grounds that it would raise prices for consumers.

The government contends that the acquisition of the No. 4 wireless carrier in the country by No. 2 AT&T would reduce competition and that would lead to price increases.

At a news conference, Deputy Attorney General James Cole said the combination would result in "tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services."

The lawsuit seeks to ensure that everyone can continue to receive the benefits of competition, said Cole.

AT&T said it would fight and ask for an expedited court hearing "so the enormous benefits of this merger can be fully reviewed." The company said the government "has the burden of proving alleged anti-competitive effects, and we intend to vigorously contest this matter in court."

Four nationwide providers - Verizon, AT&T, T-Mobile and Sprint - account for more than 90 percent of mobile wireless connections.

T-Mobile has been an important source of competition, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network, according to Sharis Pozen, acting chief of Justice's antitrust division.

Mobile wireless telecom services play an increasing role in day-to-day communications, with more than 300 million smart phones, data cards, tablets and other mobile wireless devices in use.

Deutsche Telekom, the owner of T-Mobile, had no immediate comment.

The proposed cash-and-stock transaction would catapult AT&T past Verizon Wireless to become the nation's largest wireless provider, and leave Sprint Nextel Corp. as a distant number three.

In a statement, Sprint said the Justice Department's lawsuit "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."

AT&T and T-Mobile compete nationwide, in 97 of the largest 100 cellular marketing areas, according to the suit filed in U.S. District Court in Washington. They also vie for business and government customers.

The suit says AT&T's acquisition of T-Mobile would eliminate a company that has been a competitive factor through low pricing and innovation. T-Mobile had the first handset using the Android operating system, Blackberry wireless email, the Sidekick smart phone, national Wi-Fi "hotspot" access and a variety of unlimited service plans.

In support of its case, the department quoted an unidentified AT&T employee on a competitive issue, the sophisticated wireless broadband devices that can provide high-speed data connections. The AT&T employee, according to the suit, noted that T-Mobile was first to have such devices in its portfolio and that "we added them in reaction to potential loss of speed claims."

Federal Communications Commission chairman Julius Genachowski said the record before his agency "raises serious concerns about the impact of the proposed transaction on competition." The FCC's separate review of the proposed merger is not complete.

Commission member Michael Copps, a Democrat and a staunch opponent of industry consolidation, said that he shares "the concerns about competition and have numerous other concerns about the public interest effects of the proposed transaction, including consumer choice and innovation."

Democratic Sen. Herb Kohl of Wisconsin, who heads the Senate Judiciary subcommittee on antitrust, competition policy and consumer rights, said the suit was an effort to protect consumers "in a powerful and growing industry that reaches virtually every American."

The suit used some of T-Mobile's own documents describing its role in the market to explain why the merger shouldn't take place. In those documents, the company calls itself "the No. 1 challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market."

T-Mobile said its strategy is to attack other companies and find innovative ways to overcome the fact that it is a smaller company.

T-Mobile "will be faster, more agile and scrappy, with diligence on decisions and costs both big and small," one company document said. "Our approach to market will not be conventional, and we will push to the boundaries where possible."

Since AT&T first announced the deal in March, it has insisted that consumers would have a choice of multiple wireless providers, including Leap, Metro PCS and U.S. Cellular, in many markets even if the deal is approved.

But the department rejected that argument. It said regional providers face "significant competitive limitations" because they do not have national networks. The department said the enormous investments and resources needed to acquire wireless spectrum and build a network make it very difficult for new companies to enter the wireless market.

AT&T and T-Mobile also have said the merger would reduce dropped and blocked calls, and speed mobile Internet connections for subscribers. Faster service would result by combining their limited wireless spectrum holdings at a time when both companies are running out of airwaves to handle mobile apps, online video and other bandwidth-hungry services.

Finding more airwaves to keep up with the explosive growth of wireless broadband services is a priority of the FCC and the Obama administration.

But the Justice Department said AT&T could "obtain substantially the same network enhancements ... if it simply invested in its own network without eliminating a close competitor."

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pruck3

AT&T promised to bring back 5000 good paying customer jobs from overseas if this is approved. I'm not convinced the government had the people's best interest in mind. Keep your eyes peeled for what will be some gigantic contributions to democratic causes in the near future by the likes of Verizon!

September 01 2011 at 6:47 AM Report abuse +2 rate up rate down Reply
2 replies to pruck3's comment
janswizz

This administration anti-business it's obvious by the high unemployment percentage. Obama should quit deceiving the American voters.

September 01 2011 at 9:37 AM Report abuse rate up rate down Reply
janswizz

This administration anti-business it's obvious by the high unemployment percentage. Obama should quit deceiving the American voters.

September 01 2011 at 9:38 AM Report abuse rate up rate down Reply
mikepal77

any large merger is not good for the consumer or the unemployment rate.what happened to energy prices after the consolidation of the oil industry?...Prices tripled....When a corp. gets to big an can dominate an industry or two can`t be good for the public.

September 01 2011 at 6:41 AM Report abuse -1 rate up rate down Reply
mikepal77

awesome, government finally getting off their asses and doing something productive.

September 01 2011 at 6:32 AM Report abuse -1 rate up rate down Reply
missy29

So the justice department thinks if att buys out t-mobile, the price of service would go up? Hmmm, they havent seen my t-mobile bill then. IT CANT GET ANY HIGHER!

September 01 2011 at 12:23 AM Report abuse rate up rate down Reply
1 reply to missy29's comment
drpmindmender

No, but the service can get worse.

September 01 2011 at 2:39 AM Report abuse rate up rate down Reply
Don

Gee, didnt the Government say that when they forced AT&T to break up? Didnt they say the prices would go down? They didnt then and so what if you are big. The Government bailed out Big Banks and Big Car Companys so whats wrong with being big. Guess they just need someone to pick on. Goverment: Millionairs protecting Millionairs!

September 01 2011 at 12:01 AM Report abuse +1 rate up rate down Reply
1 reply to Don's comment
jmeehan102

Get your facts straight??? Prices dropped like a rock when AT&T was broken up 25 years ago. Do you remember what long distance calls used to cost? They went from an average of 25 cents a minute to 1 cent a minute within a few years......because of the break-up.

September 01 2011 at 12:38 AM Report abuse rate up rate down Reply
spreegiddyup

I really don't want this deal to go through I hate AT&T but I don't know that I want the government involved.....

August 31 2011 at 11:46 PM Report abuse rate up rate down Reply
1 reply to spreegiddyup's comment
drpmindmender

If the government doesn't get involved, the deal will go through.

September 01 2011 at 2:42 AM Report abuse rate up rate down Reply
cawbazaw

OK, LET me get this STRIAIGHT as the Beastie Boyz yelled!!!! If you are a bank or a producer of CARS, the GOVT will ....BAILOUT YO A$$? But if you wanna buy another business because you are HUGE SUCCESSFUL BUSINESS, the govt. WILL STOP YOU??? 25 yrs ago in high school a democracy seemed different in my mind.....

August 31 2011 at 11:22 PM Report abuse rate up rate down Reply
1 reply to cawbazaw's comment
drpmindmender

I guess the idea of paying more for your cell service, while getting worse service, appeals to you.

September 01 2011 at 2:44 AM Report abuse rate up rate down Reply
RICK

You have to let Warren Buffet in on the deal or host a big Owebama Fundraiser.

August 31 2011 at 10:48 PM Report abuse +1 rate up rate down Reply
kenkeune

It's a shame these higher powers didn't take an interest when Mercedes bought the Chrysler Corp, and bled the company of billions. It was OK for foreigners to ruin that company and any other they desire.

August 31 2011 at 9:55 PM Report abuse +1 rate up rate down Reply
Rebecca

Just another expense to the tax payers! When is all of this going to stop? I understand the concept behind it all, however a law suit? Please, the fed. gov. has gotten to where there is a law suit a day. Next they will want to be in the cell phone business like insurance. I am just plain disgusted with it all.

I agree AT&T is a bunch of thieves. IF you have not paid close attention to your bill recently, they have just added a long distance charge. I made it clear years ago that I did not want long distance on my land line. However, for two months in the tiny print at the end of the bill they notified you about the new upcoming charge and you could opt out. I think you should have to opt in! I had to file a complaint on line because the rep I spoke to refused to do anything about it. I told her I did not want it, and the next month I was charged again. Friends of mine have gotten huge "unauthorized" long distance charges for calls they never made, and have had to fight with them.

Rather than a law suit, why is the gov. not monitoring this kind of fleecing of America? In my city, we have no other option, which is another issue. Like the only cable company is Time Warner. They can go up on their prices, and you can either pay it or do without. So, we use AT&T U-verse which is beautiful, but I hear they are going up, and once they do, we will use a satellite. We use Direct TV at our second home in the mountains, and so far they have been easy to work with. The reason? They have competition and not the only satellite company in the area. Some times competition is good, and keeps the cost down.

August 31 2011 at 9:49 PM Report abuse rate up rate down Reply