US DoJ spikes AT&T/T-Mobile USA merger

In a move that appears to have caught the affected parties by surprise, the U.S. Department of Justice (DoJ) announced yesterday that it would file suit to block AT&T’s proposed acquisition of Deutsche Telekom’s T-Mobile USA unit. The DoJ concluded that the deal, if completed, would significantly hinder competition in the U.S. wireless services market.

In a move that appears to have caught the affected parties by surprise, the U.S. Department of Justice (DoJ) announced yesterday that it would file suit to block AT&T’s proposed acquisition of Deutsche Telekom’s T-Mobile USA unit. The DoJ concluded that the deal, if completed, would significantly hinder competition in the U.S. wireless services market.

“The Department filed its lawsuit because we believe 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 their mobile wireless services,” said Deputy Attorney General James M. Cole at a press conference yesterday to discuss the anti-trust suit.

AT&T and Deutsche Telekom were understandably displeased.

“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,” said Wayne Watts, AT&T senior executive vice president and general counsel in a statement released to the press. “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.”

“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,” said Philipp Schindera, executive vice president of corporate communications at Deutsche Telekom in a similar press statement. “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.

The DoJ, AT&T, and Deutsche Telekom will now battle in U.S. District Court in Washington, DC. A date for opening arguments has not yet been set.

AT&T and Deutsche Telekom announced the proposed deal in March, under which AT&T would pay $39 billion for T-Mobile USA and provide the German incumbent carrier with an approximately 8% stake in AT&T. AT&T promoted the acquisition as beneficial to consumers because it would enable the company to improve services through access to more wireless spectrum, speed deployment of broadband services to both AT&T and T-Mobile USA customers, and promote jobs. In fact, earlier in the day, AT&T announced that it would return approximately 5,000 call center jobs to the United States that it had previously outsourced if the deal were to go through.

Critics of the proposed merger asserted that it would create a de facto duopoly in the wireless market between AT&T and Verizon, that it would in fact result in job losses, and that AT&T didn’t need T-Mobile’s assets to achieve its broadband penetration goals.


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