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Department of Justice Sues to Block AT&T/T-Mobile Deal

Dept Justice FCC Says: AT&T Says: Deutsche Telekom: Comments  54  

Aug 31, 2011, 9:50 AM   by Eric M. Zeman   @phonescooper
updated Aug 31, 2011, 11:26 AM

The U.S. Department of Justice has filed a lawsuit seeking to block AT&T's proposed acquisition of smaller rival T-Mobile. "AT&T's elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market," the DoJ said in a filing. At a press conference, Deputy Attorney General James Cole said the proposed acquisition would" result in tens of millions of consumers facing fewer choices and lower-quality products." The government said the acquisition would violate U.S. antitrust laws and hopes to block the deal from going through, although the door is open for AT&T to make alternate suggestions that could cause the government to reconsider. The Justice Department filed the lawsuit in Federal Court in Washington, D.C. The acquisition has been under federal review for several months. The Federal Communications Commission has yet to voice any decision on the deal, but chairman Julius Genachowski issued a statement after the DoJ lawsuit became public. He said, "Although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition." Wayne Watts, AT&T Senior Executive Vice President and General Counsel, issued a statement in response, saying that AT&T is "surprised and disappointed" by the DoJ's actions. AT&T said it will fight the DoJ's lawsuit in court, and believes it will prevail.

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Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Wednesday, August 31, 2011

Justice Department Files Antitrust Lawsuit to Block AT&T's Acquisition of T-Mobile

Transaction Would Reduce Competition in Mobile Wireless Telecommunications Services, Resulting in Higher Prices, Poorer Quality Services, Fewer Choices and Fewer Innovative Products for Millions of American Consumers

WASHINGTON - The Department of Justice today filed a civil antitrust lawsuit to block AT&T Inc.'s proposed acquisition of T-Mobile USA Inc.
The department said that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.

The department's lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.

"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."

"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. "Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer."

Mobile wireless telecommunications services play a critical role in the way Americans live and work, with more than 300 million feature phones, smart phones, data cards, tablets and other mobile wireless devices in service today. Four nationwide providers of these services - AT&T, T-Mobile, Sprint and Verizon - account for more than 90 percent of mobile wireless connections. The proposed acquisition would combine two of those four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing.

According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation's largest 100 cellular marketing areas. They also compete nationwide to attract business and government customers. AT&T's acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace.

The complaint cites a T-Mobile document in which T-Mobile explains that it has been responsible for a number of significant "firsts" in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi "hotspot" access, and a variety of unlimited service plans. T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology. The complaint states that by January 2011, an AT&T employee was observing that "[T-Mobile] was first to have HSPA+ devices in their portfolio...we added them in reaction to potential loss of speed claims."

The complaint details other ways that AT&T felt competitive pressure from T-Mobile. The complaint quotes T-Mobile documents describing the company's important role in the market:
• T-Mobile sees itself as "the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market"; and
• T-Mobile's strategy is to "attack incumbents and find innovative ways to overcome scale disadvantages. [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small.

Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . ."
The complaint also states that 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. And, the department said that any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction's anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction. The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction's substantial adverse impact on competition and consumers. Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

AT&T is a Delaware corporation headquartered in Dallas. AT&T is one of the world's largest providers of communications services, and is the second largest mobile wireless telecommunications services provider in the United States as measured by subscribers. It serves approximately 98.6 million connections to wireless devices. In 2010, AT&T earned mobile wireless telecommunications services revenues of $53.5 billion, and its total revenues were in excess of $124 billion.

T-Mobile, is a Delaware corporation headquartered in Bellevue, Wash. T-Mobile is the fourth-largest mobile wireless telecommunications services provider in the United States as measured by subscribers, and serves approximately 33.6 million wireless connections to wireless devices. In 2010, T-Mobile earned mobile wireless telecommunications services revenues of $18.7 billion. T-Mobile is a wholly-owned subsidiary of Deutsche Telekom AG.

Deutsche Telekom AG is a German corporation headquartered in Bonn, Germany. It is the largest telecommunications operator in Europe with wireline and wireless interests in numerous countries and total annual revenues in 2010 of 62.4 billion euros.

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Comments

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This forum is closed.

tether

Aug 31, 2011, 11:08 AM

If DT wants out of the U.S., maybe U.S. Cellular could find a way to take TMO over?

Just came to me in that this outcome would likely not be challenged as it would really equal things out in the U.S. While a little more difficult to implement the potential merger's USC's CDMA and TMO's GSM technology, it would be good for consumers and for U.S. Cellular as that "overnight" they will become a legitimate national carrier. Verizon has 100 million, ATT has 95 million and Sprint has 50 million customers. Now USC with 15 million and TMO with 35 million would make it a 2 way tie for 3rd place "national" carrier with the newly combined U.S. Cellular having 50 million customers as well. Maybe DT doesn't get all there money right away but over a little time and gets a big stake in the new U.S. Cellular.
hahahaha...cant not stop laughing...

Ok,fact check time: US Cellular does not have 15 million, but around 5 or 6 million customers..Seriously, where did you get that number of 15 million?

Also, does US Cellular really have the money to buy T-Mo...
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sunilsonia

Aug 31, 2011, 2:01 PM

Up your's AT&T!!

Arrogance, money and power don't always get you what you want. Just ask the Lakers and Patriots, LOL!!!

Do you actually think customers would be stupid enough to sit quietly while you hijack/kidnap T-Mobile? Really??? LOL
Arrogance, money and power do get you what you want...just ask Steve Jobs.
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LOL!!!! wtf are you talking about? Hijack/kidnap Tmobile???

In a statement to Ina Fried at AllThingsD, Deutsche Telekom Executive Vice President Philipp Schindera said the company "is very disappointed by the DOJ's action," and that it "will join A...
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i laugh at this post hijacking/kidnapping tmobile....HAHAHAHAHAHA. i did not see that a company that WANTS to merge with another and vice versa is considered hijacking/kidnapping practically i dont care if they merge or not.
iDont Care

Aug 31, 2011, 10:45 AM

Not to be a party popper but...

DT still doesn't want T-Mo and this doesn't mean that the deal won't go through. AT&T has plenty tricks up it's sleeve. Plus, the DOJ also did this to the Google ITA deal then approved it after Google agreed to certain restrictions. So I wouldn't be celebrating just yet. Even if it's blocked, we could still face the possibility if losing our beloved T-Mo. Worst case scenario would be to carrier like Sprint. That would be catastrophic.
Not popper lmao
T-Mobile has value as a stand alone carrier. Perhaps if this deal falls through some venture capital would go that direcction instead. Think outside of the box.
...
Actually worse case scenerio would be DT dropping them completely and TMO going belly-up dropping all their emps/customers on their butts. If we think about this, ATT buying tmo is great for at least the employees. They get a chance to keep their jo...
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vedelorme

Aug 31, 2011, 10:31 AM

YES!!!!

YES!!!
Do not celebrate just yet. AT&T has lots of $$$ and tricks left up their sleeves.
The T-Mobile girl with the fuschia dresses still needs to watch out for floor mirrors from AT&T. Surprised
Hopefully she can use those high stilettos of hers to crack the flo...
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tether

Aug 31, 2011, 2:46 PM

How about 277 million strong America Movil buys out T-Mobile?

As pointed out to me earlier, US Cellular, MetroPCS & Leap (Cricket) are all too weak to buy T-Mobile. Verizon is a guaranteed rejection if ATT gets blocked. Sprint is still losing money & would likely have a hard time coming up with a deal DT would accept. Maybe Carlos Slim's 277 million strong (more than Verizon, ATT, Sprint combined) could put in an offer for T-Mobile. If he pulled his U.S. brands StraightTalk, Net10 & TracFone out of using Verizon/ATT & put those brands exclusively on T-Mobile that would really hurt ATT/VZW's subscriber base & really pump up T-Mobiles likely propelling them past Sprint into number three position.
I thought this would have had people all over it already with responses.
The only problem with this is that the U.S. brands are all MVNO's.
They are the most affordable and competitive alternatives out there. MetroPCS is the only non-MVNO comparabl...
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jhr2112

Aug 31, 2011, 10:02 AM

sweet!

I guess all those letters we wrote to the Justice Department, FCC and our congressmen worked..That would have been really bad for consumers..Finally government listened!
I wonder what took them so long to figure out this violates U.S. antitrust laws, I mean they are the DOJ,they should have kniwn this months ago.
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attrep42

Aug 31, 2011, 11:42 AM

How interesting...

I find it odd that they waited this long, but I'm confident that AT&T will find a way to make it happen.I love how people are all whining about price increases if the merger goes through... People, if it happens, you'll have the option to walk away and go to a crappy low-cost carrier of your choice w/o fee. No one will force you to have at&t. And, as for Sprint ,stop whining about trying to compete if this goes through,b/c most customers who would opt not to come to att, will go there and since they are possibly getting the iphone, theres NO WAY they couldn't remain competitive
attrep42 said:
I find it odd that they waited this long, but I'm confident that AT&T will find a way to make it happen.I love how people are all whining about price increases if the merger goes through... People, if it happens, you
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glinc

Aug 31, 2011, 10:45 AM

Solution for AT&T

Tell T-Mo to start making some moves that will make the company go downhill and declare bankrupcy... after that, there is no other option but sell or bail-out from feds.
They've been doing this for a while. Free credits for things, free handsets, free microcells, etc. All that is *def* not helping their profit margin.
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bradspace

Aug 31, 2011, 11:35 AM

Sorry AT&T customers...

...you're stuck with your own crappy service instead of picking up MY crappy service. I wouldn't pay $.50 for ALL of T-mobile. I'm getting out while the getting is good.
tether

Aug 31, 2011, 11:04 AM

Way to go government! EXCELLENT Work!!!!!

Proud to be an American today that the robber barons at the top seeking to rip us all of were blocked by the people. Magnificent!
 
 
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