The U.S. Justice Department has moved to block AT&T’s proposed $39 billion acquisition of T-Mobile, with a civil antitrust lawsuit filed Wednesday in U.S. District Court in Washington D.C.
In a statement, the DOJ said that the merger would lead to reduced competition, increased prices, and lower quality products and services for mobile telecommunications customers.
The controversial acquisition, proposed last March, would consolidate two of the four remaining national mobile service carriers, effectively eliminating a firm that brings a vital competitive element to the marketplace, according to the Justice Department.
"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 M. Cole, in the DOJ statement. "Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation's wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition."
T-Mobile has been a leader in wireless innovation, which might be lost in the merger, the DOJ said.
"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," said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice's Antitrust Division, in ther DOJ statement. "Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer."
Last March, in an interview with CRN, AT&T’s senior vice president and general counsel, Wayne Watts said he felt confident that the D.O.J. would approve the acquisition. He cited AT&T’s 2004 acquisition of Cingular Wireless as evidence of the company’s experience navigating tricky mergers.
AT&T expressed surprise and disappointment at the news of the antitrust suit and vowed to legally defend the merger.
“We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The D.O.J. has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court,” the company said in a statement released Wednesday,
AT&T said benefits of the proposed merger with T-Mobile include a solution to spectrum shortages, improved wireless service nationwide, expanded mobile broadband for 97 percent of the U.S. population and billions of investment dollars and tens of thousands of additional jobs.
As part of the T-Mobile merger, AT&T has committed to an increased infrastructure investment of over $8 billion. That investment could produce an estimated 96,000 new jobs, according to an analysis by the Economic Policy Institute that was commissioned by the Communications Workers of America.
In a first step towards that job creation, AT&T said on Tuesday it would bring back 5,000 wireless call center jobs that are currently outsourced overseas after closing the T-Mobile merger.
AT&T has a lot to lose should the deal fall through for regulatory reasons. If the DOJ manages to successfully block the merger, AT&T will owe T-Mobile’s parent company, Deutsche Telekom, a cash breakup fee of $3 billion. With added roaming and spectrum rights, that’s an estimated total of $6 billion.
However, on Wednesday Deutsche Telekom joined AT&T in its disappointment over the DOJ complaint.
“Deutsche Telekom 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,” said Deutsche Telekom’s executive vice president of Corporate Communications, Philipp Schindera, in a statement.