Government sues to block AT&T, T-Mobile merger

Government contends takeover would raise prices for consumers

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WASHINGTON — 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, Cole said.

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 anticompetitive 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, the 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 No. 3.

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 competitor through low pricing and innovation. T-Mobile had the first handset using the Android operating system, Blackberry wireless e-mail, the Sidekick smart phone, na­tional Wi-Fi “hotspot” access and a variety of unlimited service plans.

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

Federal Communications Commission chairman Julius Gen­achowski said the record before the FCC “raises serious concerns about the impact of the proposed transaction on competition.” The FCC’s separate review is not yet complete.

FCC member Michael Copps, a Democrat and a staunch opponent of industry consolidation, said 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.”

The suit used some of T-Mobile’s own documents describing its role in the market to oppose the merger. 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 TROUBLES

SUBSCRIBERS DOWN: Although the government is blocking AT&T’s purchase of T-Mobile to keep a low-priced competitor around, T-Mobile has seen the number of customers drop even with its low prices and marketing efforts.

WHAT NOW? Customers will be able to keep their wireless service plans. But in the long run, if the merger doesn’t go through, T-Mobile is in an unsustainable position.

TROUBLES AT BOTH ENDS: At the high end of the market, it can’t compete with Verizon Wireless and AT&T Inc., the market leader and No. 2, respectively. At the low end, T-Mobile is struggling against competitors like Sprint Nextel Corp. and MetroPCS Holdings Corp.

– Associated Press


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