Department of Justice moving to block $39 billion AT&T/T-Mobile merger | Appolicious iPhone and iPad apps

Department of Justice moving to block $39 billion AT&T/T-Mobile merger

Aug 31, 2011

The Department of Justice filed an anti-trust lawsuit this morning to block the merger of AT&T, the No. 2 cellular provider in the U.S., with No. 4 provider T-Mobile, writing that the deal is unnecessary for AT&T and would hurt consumers and competition.

The filing states that the merger would reduce competition while forcing “tens of millions” of Americans to pay higher prices. This has been the criticism of the $39 billion deal from the beginning, as No. 3 carrier Sprint, AT&T customers and consumer advocacy groups have loudly pointed out. AT&T has countered that the T-Mobile deal would help it to expand its 4G LTE network to cover as much as 97 percent of the country, but leaked filings to the Justice Department suggest that expanding its network would be significantly cheaper than $39 billion – more in the order of $3.8 billion in work on its infrastructure.

In the filing, the DOJ claims that the merger isn’t necessary for AT&T to fix up its network and would have too big a negative effect on competition. According to Wired’s story, the merger would make the combined AT&T a third larger than Verizon, the current No. 1, and twice as big as Sprint.

Here’s a quote from Wired’s story:

The combination of AT&T and T-Mobile 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,” said Deputy Attorney General James M. Cole. “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.

As the Wall Street Journal points out, however, the door to the merger hasn’t been slammed shut: if AT&T proposes remedies to the Justice Department’s issues with the merger, it would reconsider approving it. That would mean AT&T and T-Mobile finding a way to keep competition robust while still becoming a huge new corporation.

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For T-Mobile’s part, it could have some issues if it isn’t acquired by AT&T. The company is struggling to compete with the larger cellular providers and its owner, Deutsche Telekom AG, is unwilling to invest more money in the company. As AT&T said earlier in the process, it seems somebody is going to end up buying T-Mobile. For the time being, though, that’s not AT&T.

Meanwhile, Engadget is reporting that AT&T has released a statement in response to the filing, in which AT&T Senior Executive Vice President and General Counsel Wayne Watts states that the company is surprised at the DOJ’s move.

“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,” Watts writes. The statement goes on to restate AT&T’s company line about the benefits of the merger – the expansion of its network to 55 million more Americans, add thousands of jobs through additional investment and solve some cellular spectrum bandwidth problems.

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

So it seems that in court is where the merger, and a big portion of the future of the U.S. cellular business, will be written.

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Phil Hornshaw

Phil Hornshaw is a freelance writer, editor and author living in Los Angeles, dividing his time between playing video games, playing video games on his cell phone, and writing about playing video games. He’s also the co-author of So You Created a Wormhole: The Time Traveler’s Guide to Time Travel, which attempts to mix time travel pop culture with some semblance of science, as well as tips on the appropriate means of riding dinosaurs. Check out his profile.

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