Business

Justice Department blocks AT&T-T-Mobile merger

WASHINGTON (AP) — 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.

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, said Cole.

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 anti-competitive 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, 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.

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.

It says AT&T’s acquisition of T-Mobile would eliminate a company that has been a competitive factor through low pricing and innovation.

Federal Communications Commission member Michael Copps, a Democrat and a staunch opponent of industry consolidation, said that 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.”

Democratic Sen. Herb Kohl of Wisconsin, who heads the Senate Judiciary subcommittee on antitrust, competition policy and consumer rights, said the suit was an effort to protect consumers “in a powerful and growing industry that reaches virtually every American.”

The suit used some of T-Mobile’s own documents describing its role in the market to explain why the merger shouldn’t take place. 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 said its strategy is to attack other companies and find innovative ways to overcome the fact that it is a smaller company.

T-Mobile “will be faster, more agile and scrappy, with diligence on decisions and costs both big and small,” one company document said. “Our approach to market will not be conventional, and we will push to the boundaries where possible.”

The suit also says the anti-competitive problems a merger would cause cannot be overcome by regional companies.

Regional companies lack national networks, so are limited in their ability to compete with the four national carriers, the lawsuit states.

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Online:

Justice Department’s lawsuit: http://tinyurl.com/44lx4qo

  • Gene

    What a charade. AT&T is still a monopoly. They just change the perception of them selves occasionally. This is all too little too late. I am forced to use AT&T and they are totally inefficient and have horrible customer service.

    • http://twitter.com/aemoreira81 Adam Moreira

      No, it is not. AT&T Mobility is currently the #2 wireless carrier with 25 percent of the market. Cellco Partnership (Verizon Wireless) is #1 with 32 percent, and T-Mobile is #3 with 12 percent. (Sprint is 4th with 12 percent).

      Addressing @jonathangalt: There was already antitrust action taken against Microsoft. As for Apple, they compete with Microsoft and Google (Rule of 3).

      Coca-Cola and Pepsico compete very much against Dr Pepper-Snapple (Rule of 3).

      NFL – NBA – NHL – MLB (Rule of 3, actually 4).

      In a mature economy, you never have fewer than 3 unique providers of a service.

      • Anonymous

        Bingo!! As an open market person I’ve generally no objection to most mergers and acquisitions, but, as you point out, for those of us that despise CDMA, eliminating the ability to play the GSM  providers, AT&T and T-Mobile, off each other is an anti-competitive and, in effect, monopolizing move.

  • http://twitter.com/aemoreira81 Adam Moreira

    The Rule of 3 in full effect. IMO, this had to happen, because it would have left 2 companies with over 70 percent of the market. There should be no fewer than 3 major players in a free market ever.

    • Anonymous

      coke and pepsi control 73.3% of the market.  So ATT would control 37% of the market?  It is our government’s job to protect against companies that own 37% of the market?  What if ATT takes over 12% more of the market?  Do we dismantle them? 

      • http://twitter.com/aemoreira81 Adam Moreira

        AT&T and Verizon would have had 70 percent of the market…the next competitor would have had only 12 percent. Pepsico and Coke didn’t really buy out competitors though or force them out – they simply produce popular products.

        AT&T here is trying to buy out competitors. But most significant, and as I did cite earlier, AT&T would have had way too much of the GSM market. There are many small providers, but AT&T would have been the 500-pound gorilla in this regard.

        AT&T and T-Mobile – GSM. Verizon Wireless and Sprint Nextel – CDMA. That would also give AT&T a dominant position in phones used in other country; an AT&T Mobility or T-Mobile phone will work in most countries.

  • Anonymous

    What business is this of Obama and Holder?  Once again, they are protecting the underperformers.  Where in the constitution or law does it protect against duopolies (which this isn’t)?  Are they protecting Sprint or their foreign conglomerate cronies that want to take over Tmobile?  Should Coke or Pepsi, Microsoft and Apple, the NFL etal. be broken up?  They all control more of the market than ATT and Verizon would post merger.  Are they trying to extort more out of ATT, say broadband for all or net neutrality?  This is a travesty. 

    The govt has no business in business.