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“AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market." -- U.S. DOJ  (Source: Miramax Films)
U.S. Justice Department says combined company would break antitrust laws

AT&T Inc.'s (T) bid to acquire to rival U.S. carrier Deutsche Telekom AG's (ETR:DTE) T-Mobile USA may have slammed into a roadblock today, with Bloomberg reporting that the U.S. Department of Justice had filed paperwork to block the acquisition. 

Back in March, AT&T first announced its intentions to purchase T-Mobile for a whopping $39 billion USD ($25 billion USD in cash, the remainder in stock).  Reportedly AT&T had been negotiating the purchase behind closed doors since January.

The deal would mark the latest consolidation in the race by America's top carriers Verizon Communications
, Inc. (VZ) and AT&T to gobble up would-be competitors.  Had the deal been approved it would have granted AT&T and Verizon control over more than 80 percent of American cell phone contracts -- a "duopoly" according to some.  AT&T would have approximately 130 million subscribers, while Verizon would have 97 million subscribers.

Verizon and AT&T often marched in lock step when it came to pricing and contract terms, as witnessed by both companies' decisions to kill "unlimited" smart phone internet privileges for new customers [1][2].

AT&T Chairman and CEO Randall Stephenson championed the deal, stating that it would fulfill President's Obama's vision to blanket the nation with high-speed wireless access:

This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions and operations. We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities, we can better meet our customers’ current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly connected America.

However, almost the majority AT&T and T-Mobile customers we interviewed expressed concern about the deal -- particularly T-Mobile customers who feared increases from T-Mobile's budget prices.

The deal would have left Sprint Nextel Corp. (S), who bitterly opposed the deal, in a distant third place, with 52 million customers.  Sprint thus far has refused to join the informal Verizon-AT&T coalition when it comes to contract terms -- it continues to offer unlimited internet. 

Reportedly the U.S. Justice Department sided with Sprint in the end, filing paperwork to block the merger, citing antitrust concerns. 

"AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market," said the filing [press release].

"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. "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."

If the U.S. Government makes good on its intentions and officially blocks the sale of T-Mobile, AT&T has promised to pay Deutsche Telekom $3 billion USD in cash. In addition, Deutsche Telekom would receive an additional $2 billion USD worth of spectrum and secure a $1 billion USD roaming agreement reports Reuters.

Both AT&T and Sprint have responded to the actions by the DOJ. Up first is Wayne Watts, AT&T Senior Executive Vice President and General Counsel:

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.

Next up is Vonya B. McCann, senior vice president of Government Affairs for Sprint:

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....

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RE: Good
By quiksilvr on 8/31/2011 12:00:23 PM , Rating: 2
I agree. The thing is though, it isn't just about having a "duopoly" in the market. If AT&T buys T-Mobile, it will be the ONLY GSM major cellphone company in America. Sprint is heading down a WiMax path that isn't futureproof by any means and might have to merge with Verizon to stay competitive, making that the only major CDMA cellphone company in America. Either Verizon goes GSM (highly HIGHLY unlikely) or this merger simply cannot happen.

RE: Good
By mcnabney on 8/31/2011 12:33:10 PM , Rating: 2
You haven't kept up.

Sprint is ditching WiMaxx and going with LTE. Eventually all US carriers will have LTE with Verizon there already and AT&T to follow next year. Not sure how Sprint will change techs. If they want to avoid operating two 4G networks they are going to have to brick all of their Wimaxx devices.

RE: Good
By jnemesh on 8/31/2011 1:42:33 PM , Rating: 2
Its worth noting, however, that AT&T LTE will not be compatible with Verizon LTE, which will not work with Sprint LTE, etc. Even though the TECHNOLOGY is the same, these companies will be operating at different frequencies. The dream of being able to take a sim chip out of a Verizon phone and plugging it into an AT&T or T-Mobile phone is still far, far away.

RE: Good
By Master Kenobi on 8/31/2011 2:02:59 PM , Rating: 2
LTE uses different frequencies in every major country, the standard for LTE is a complete cluster****. Any phone that promises to be "international" will be able to handle all the carriers in the US and several other countries. No worries on that.

RE: Good
By DanNeely on 8/31/2011 2:34:35 PM , Rating: 2
That's true as far as it goes; but unless you buy an unlocked phone it won't do you any good in the US. VZW has stated that while they'll unlock their phones to work on international GSM/LTE networks for customers in good standing, the unlock will not remove the restriction prohibiting them from connecting to ATTs (or IIRC any other US rivals) 3/4g network that they don't already have a roaming agreement with.

RE: Good
By HrilL on 8/31/2011 2:07:51 PM , Rating: 2
The equipment sprint has been installing for wimax was also designed to support LTE with a software update from what I’ve read. Also Sprint has a lot of extra spectrum right now so running both networks at the same time shouldn’t be an issue. Don't think they're going to avoid it and probably run both nextworks for at least 4 years while the phase out the older devices.

RE: Good
By DanNeely on 8/31/2011 2:42:23 PM , Rating: 2
Even if Sprint buys clearwire I think you're being optimistic. It's been 6 years since they bought Nextel and despite only being obligated to maintain it for 4 years as part of the merger terms the iDen shutdown date keeps getting pushed into the future. Currently it's 2013, but with new iDen phones having launched this past April and the first non-iDen push to talk phones not due until next year I don't see it going away until 2014 at the earliest.

Sprint also is yet to publicly articulate how it's going to handle their iDen only roaming partners, as those without CDMA/GSM service as well will be left high and dry when the network is shut down. With sprint/clearwire talking about letting 3rd parties resell their wimax service they could easily find themselves in a similar situation with that platform.

RE: Good
By woody1 on 9/1/2011 12:05:08 PM , Rating: 2
I agree. If t-Mobile doesn't want to stay in the US wireless business, they should sell their assets to another provider. Or else the FCC should reclaim their spectrum and auction it to new market entrants.

Either way, a duopoly is not good. And this merger will mean an outright monopoly on GSM service, making AT&T the only US company to use the international standard.

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