US seeks to block AT&T’s T-Mobile acquisition; claims it will stifle competition and innovation

Wed, Aug 31, 2011

Legal, News

AT&T this past May decided to use some of their iPhone profits and acquire T-Mobile from Deutsche Telekom for $39 billion. Should the deal approve regulative scrutiny, AT&T would leapfrog Verizon and become the nation’s largest wireless carrier.

But that regulatory approval hit a roadblock today as the U.S government filed suit today to block the proposed acquisition claiming that the deal runs afoul of antitrust law and would “substantially lessen competition” in the wireless market. Consequently, the US is seeking a court order that would effectively block any implementation of the acquisition.

“AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market,” the U.S. explained in its brief. “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. Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.”

For its part, AT&T argues that the acquisition will help create as many as 5,000 new jobs and, as it noted in the original press release touting the purchase, will provide “an optimal combination of network assets to add capacity sooner than than any alternative.”

The US considered these claims but ultimately found them unpersuasive.

The department 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. Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

Update: AT&T today responded to the suit in a statement issued to BGR.

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.

Lastly, as part of the original proposal between the two companies, AT&T agreed to a $3 billion breakup fee meaning that it will owe Deutsche Telekom that amount in cash if the deal doesn’t go through.

The Justice Department’s full complaint can be read here.

via Bloomberg


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