AT&T, T-Mobile deal under fire from DOJ (updated with reactions from AT&T, T-Mobile & Sprint)

Seems like the Obama administration is cracking down on big business get togethers that potentially violate antitrust laws. First they opposed the OMX Group’s proposal to buy Euronext (both traded on Nasdaq), and now they are trying to put a halt on the AT&T purchase of T-Mobile USA. The Justice Department argues that with one less player among the national carriers, pricing will creep up and cause mobile service to be unaffordable to those with lower income. The Deputy Attorney General James Cole states that, “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers”. “This lawsuit,” he continues, “seeks to ensure that everyone can continue to receive the benefits of that competition.”

AT&T is currently the number two carrier behind Verizon, and T-Mobile is fourth. The two companies argue that this will bring more reliable and consistent coverage to consumers across the country. AT&T argues that the merger is in the best interest of consumers and would allow them to expand their 4th generation wireless network to over 97% of the population. Wayne Watts, AT&T’s general counsel states that, “we intend to vigorously contest this matter in court.”
The FCC has also been looking into the proposed merger, reviewing if the deal is in the public interest, and although their review has not been finalized, they, too, have expressed concerns over the effects this would have on competition. The FCC plans to continue reviewing the merger plans, but will not interfere with the Department of Justice’s process.

Perhaps in an effort to appeal to the regulators, AT&T announced that they plan to return 5,000 T-Mobile call center jobs back to the US once the deal is complete.

Update 1

: AT&T’s Senior Executive Vice President and General Counsel, Wayne Watts, responded with the following statement:

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.

Update 2:

Sprint also joined the party and felt compelled to let us know what they think via their Vice President of Government Affairs, Vonya B. McCann:

The DOJ today 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. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision – one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.

Update 3

: Last but not least, Deutsche Telekom parent company of T-Mobile had to intervene to let us know what they think about this issue:

On August 31, 2011, the United States Department of Justice (DOJ) informed Deutsche Telekom that it will file a complaint in the U.S. District Court for the District of Columbia seeking a permanent injunction blocking the proposed stock purchase agreement between AT&T and Deutsche Telekom under which AT&T will acquire T-Mobile USA from Deutsche Telekom.

The Company is very disappointed by the DOJ’s action, and will join AT& T in defending the contemplated merger against the complaint in court. DOJ failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction, which would lead to significant customer, shareholder, and public benefits. We appreciate the DoJ’s willingness to discuss possible remedies to address the competitive concerns.

via Bloomberg, WSJ 1, 2