Feds Sue To Block AT&T Acquisition Of T-Mobile

The U.S. Justice Department (DOJ) has filed a lawsuit in federal court to stop AT&T from taking over rival T-Mobile. The government said the proposed $39 billion transaction would substantially decrease competition in the U.S. mobile industry.

Should the merger be completed, AT&T would be, by far, the largest U.S. wireless company with Verizon Wireless second. Sprint/Nextel would be a distant third. The suit, filed in U.S. District Court for the District of Columbia, signaled the government's determination to prevent that large of a consolidation in the wireless industry.

“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.”

Consumer activists had urged DOJ and the Federal Communications Commission (FCC) to intervene, to prevent the sale from taking place. In late July, Sen. Al Franken (D-MN) went on record against the deal, in a filing with regulatory agencies.

'Not in the public interest'

"This transaction is not in the public interest," Franken said in his filing. "If approved, it would result in greatly reduced competition, the potential loss of thousands of jobs, higher consumer prices, and less innovation in technology. I urge the FCC and the DOJ to deny AT&T's application for approval of its acquisition of T-Mobile."

Franken's opposition to the proposed deal was not exactly a secret. He initially raised concerns about this merger during a statement on the Senate floor on May 4. Franken also questioned the impact of the merger on consumers at a Judiciary Committee hearing in May.

If DOJ needed further prodding to take its position, it may have come in early August when AT&T released a number of documents in its filing with the FCC.

Communications Daily, which was first to publish the documents, reported that in the filing, AT&T admitted that expanding its most advanced network to 97 percent of the country would cost only an estimated $3.8 billion. But the filing shows AT&T rejected that option, claiming there wasn’t a “viable business case” to justify the expansion.

Wireless' critical role

In its suit, the government pointed out that mobile wireless telecommunications services play a critical role in the way Americans live and work, with more than 300 million feature phones, smart phones, data cards, tablets and other mobile wireless devices in service today. Four nationwide providers of these services – AT&T, T-Mobile, Sprint and Verizon – account for more than 90 percent of mobile wireless connections. The proposed acquisition would combine two of those four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing, DOJ said.

“T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.“Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.”  

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction but concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers.