U.S. Justice Dept. moves to block AT&T, T-Mobile merger

U.S. Justice Dept. moves to block AT&T, T-Mobile merger

Summary: The U.S. government has officially filed suit to block AT&T's proposed $39 billion acquisition of T-Mobile.

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The U.S. government on Wednesday officially filed suit to block AT&T's proposed $39 billion acquisition of T-Mobile.

The reason? The acquisition of America's fourth-largest carrier by its second-largest would "substantially lessen competition" in the industry, violating U.S. antitrust law.

"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 Cole in a statement.

More points made in the filing:

  • The four major national wireless carriers -- AT&T, T-Mobile, Sprint and Verizon -- account for more than 90 percent of the market.
  • AT&T and T-Mobile compete head-to-head nationwide, in 97 of the America's 100 largest cellular marketing areas.
  • T-Mobile's small size allowed it to innovate with Android, HSPA+, national Wi-Fi "hotspot" access and unlimited service plans. That and its value pricing are at risk when joined with AT&T.
  • There's no one to fill T-Mobile's role. "Regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers," the DOJ said.

The U.S. Department of Justice filed its complaint in federal court in Washington, seeking a court order to block the deal. It's officially U.S. v. AT&T Inc., 11-01560, U.S. District Court for the District of Columbia, though documentation is not yet accessible online now available here, as a .PDF. Or, read it below:

DOJ ATT TMo Complaint 083111

Should it succeed, AT&T would be forced to pay Deutsche Telekom, T-Mobile's German parent company, $3 billion in cash, as well as additional wireless spectrum and reduced charges for calls using AT&T's network.

"Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer," said Sharis Pozen, acting assistant attorney general for the DOJ's Antitrust Division, in a statement.

UPDATE: Cole and Pozen also held a press conference about the complaint.

One point from each of their presentations:

  • Cole: "[We] will remain steadfast in its mission to vigorously enforce the antitrust laws."
  • Pozen: "It is important to move expeditiously to preserve the lower prices and innovation resulting from T-Mobile’s competitive presence in this market."

The news comes after AT&T claimed that the deal would add 5,000 new jobs in the U.S. The final decision is expected early next year.

Photo Illustration: Andrew Nusca

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Topics: AT&T, Enterprise Software, Mobility, Security

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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34 comments
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  • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

    Wait, what? Can somebody explain this to me. I understand they want to block the merger, but why would T-Mobile get 3 billion plus the other stuff if the merger that it wants in the first place failed? It's like the DOJ is suing on T-mobiles behalf against their will.

    Maybe I'm just being stupid or missing something obvious. If so, please point it out to me, I'd really like to know.
    Aerowind
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      @Aerowind

      I have to agree... something doesn't make sense here.

      I also thought part of the reason for AT&T wanting to merge with T-Mobile was because T-Mobile is hurting financially and this would allow for use of any T-Mobile's towers for expanded coverage instead of them going out of business and those towers going dormant. Besides there are the three Top Carriers (Verizon, AT&T, Sprint) then US Cellular and all the little companies like Boost, Virgin Mobile, Cricket, etc.. that are owned by the bigger companies too right. I do not think the claim of substantially lessen competition is really that valid.
      bobiroc
      • lemme break it down, quick

        @bobiroc

        typed 90% of the message out, and a damn windows update stole focus and took my keystrokes as permission to reboot...

        --There are four cell networks: AT&T, Verizon, Sprint, and T-Mo. While a few carriers have a handful of towers in a small geographic region, the other carriers either roam onto one of those networks, or use one of those networks entirely. Boost and Virgin are both prepaid services completely owned by Sprint. Their difference is purely marketing.

        --T-Mo's towers wouldn't go dormant if they went bankrupt. They'd either be sold at auction as complete cell sites, or the land itself would likely be bought by the other companies who can't set up their own cell site due to zoning regs and homeowner associations.

        --AT&T+T-Mo would give them a commanding majority of subscribers in comparision to Verizon. Rumors state that Sprint isn't doing so hot, and that there have been water cooler discussions of Verizon buying them out, too.

        --T-Mo's biggest asset is its spectrum. If AT&T gets it, they'll have more of that than any other company, to say nothing about the fact that it's basically impossible to start a new cell carrier now as it is because all the spectrum suitable enough for cell phones is in the hands of existing carriers.

        --AT&T has only publicly stated that they'll honor t-mobile contracts for the duration of those contracts - they haven't agreed to allow the same plans to be honored after the contracts expire. I, for one, would be looking at my bill increasing by nearly $40 a month if I were forced onto a comparable AT&T plan, and that negates the fact that my phone would likely be stuck on EDGE data speeds if I don't upgrade my handset as a result.

        So no, this really isn't good for anyone. AT&T Smartphone owners would see some short-term niceness as T-Mobile towers have lots of backhaul that could be utilized in order to load balance the traffic. By any other metric, it's Ma Bell calling all over again.

        Joey
        voyager529
      • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

        @bobiroc They also said that TMO's cheaper rate plans encourage (or stop if you will) rate plan prices from getting higher and higher. ATT and Verizon are definitely over the top on prices already, if TMO went bye bye it would get nasty.

        "this would allow for use of any T-Mobile's towers for expanded coverage" --This is the one statement from AT&T that I love the most. They have bought alot of spectrum to keep the competition from getting it. They charge ridiculous prices for plans, then nickel and dime you on everything else. SO, my question to ATT would be, why don't you take some of that money and spectrum and build out your own damn network, instead of letting a smaller provider like TMO do it, and then say "we need" it to expand. That's a crock.
        waterhzrd
    • It's "normal" business...

      ...for the company that initiated the merger to pay the other company a payment if the merger fails, to compensate for lost expenses and fees. However I personally have never seen a billion dollar payment, much less a 3 billion dollar payment. There's something weird about that.
      el1jones
      • Google owes Moto 2.x billion if their merger fails.

        @el1jones

        The chances of that one going through, however, is pretty darn high.
        Bruizer
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      @Aerowind
      This is SOP. If a merger is not completed -- for ANY reason other than something on the smaller company's end -- that smaller company gets money.
      x I'm tc
    • I also don't understand why they "protected" ....

      @Aerowind
      Apple from competition from a clone maker?
      None of these compute!
      kd5auq
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      @Aerowind Antitrust law isn't about doing things "on behalf" of a business, whether it's against their will or not.

      Antitrust law is about maintaining competition.

      The free market relies on competition too keep innovation high and prices low. It offers customers the ability to go somewhere else if they're not satisfied with what they've got.

      Reducing competition reduces consumer choice and innovation, and drives up prices (if you're the only game in town, there's no reason to keep prices low - after all, who else would people turn to?).

      The government isn't acting on behalf of AT&T or T-Mobile. The government is acting on the behalf of the people, the customers.

      "typed 90% of the message out, and a damn windows update stole focus and took my keystrokes as permission to reboot..."

      I hate that, I really do X(. If there's one thing that should NEVER be allowed, it's stealing focus.
      CobraA1
  • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

    The fee is $2.5billion in the google motorola deal. This is business as usual, these are just really big deals so the fees are correspondingly big.
    txscott
  • Thank Goodness

    This was a bad idea from the start. I understand concerns about spectrum, but having two choices for GSM in the US is a must.

    I think a Sprint-T-Mobile merger, while having issues of handset compatibility, would make more sense from a competition standpoint. If the world goes LTE, those issues might even become negligible in the coming decade.
    x I'm tc
  • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

    ATT claims +5000 on a merger? Who is stupid enough to believe that? Mergers = layoffs. Why does our media let companies get away with outrageous claims like this?
    FireThorn
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      Agreed. I have read 5 different articles today and not one has mentioned the number of job LOSSES the merger would result in. At least broadbandreports.com has linked to several articles pointing out AT&T's lies about jobs and spectrum, but they aren't really "main stream" as far as news goes. *sigh*
      steveb999
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      @FireThorn
      you saw that it is 5000+ jobs in the US. Many layoffs are from upper mgmt, and those for Tmobile arent in the US if i am not mistaken.
      tiderulz
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      @FireThorn maybe AT&T's number of employees go up by 5000 - it might be that they will short term need to hire 5000 people to handle all of the complaints - plus from what i read, the T-mobile customers would need to exchange phones - they would need people to do that. my guess also is that these jobs would not be permanent and probably low pay -McJobs
      stevejg61
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      @FireThorn You're right, and that number is taken out of ATT context. They've already stated 20-25,000 people would "probably" lose jobs. Then they state they would bring 5k jobs back to the US. A loss even at that, but here's the kicker. ATT's claim of 5k jobs back to US works like this: Merge, shutdown or fire overseas call desk, pull down the TMO signs on TMO's existing call desk centers already here in the US, put up ATT signs, and BOOM... 5000 jobs back to the US, even though those 5000 were already employed here.
      waterhzrd
  • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

    Obama needs to go, big mistake voting for him... I hope Romney or Perry take over and fire all the jokers at the Just Dept.

    Government, stay out of business!
    Hasam1991
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      @Hasam1991 Right! I can't wait to pay $250 a month for cell service! Hey...let's lower their taxes too then they can get us coming and going. They are job creators, for people in China.
      redhaven
    • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

      @Hasam1991 Let me guess... you're on sucky arse ATT service so you can have an iPhone and you want this deal to go through so you can have good service too. News flash, TMO customers are perfectly happy the way things are right now. Fair prices plans, great customer service, fair to good coverage, a slew of very nice Android and BB phones vs. Crappy signals, crappy service, higher prices and an iPhone. I'll opt for TMO as it is right now anyday. And if this deal goes through, I'll happily move to Sprint.
      waterhzrd
  • RE: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

    Yes it's 5,000 they just forgot the (-) sign before
    udilala