Date:01/09/11
The Justice Department on Wednesday sued to block AT&T Inc.'s proposed $39 billion takeover of T-Mobile USA, saying the combination of the second- and fourth-largest U.S. cellphone companies would hurt competition and likely raise prices.
The antitrust challenge comes shortly after the Obama administration also blocked Nasdaq OMX Group's proposed offer for NYSE Euronext and shows its desire to put new teeth into antitrust enforcement after what it says was lax enforcement under the previous administration.
The deal would create a giant in mobile telephony that AT&T has argued would provide better service to more of the country.
But the Justice Department said in its suit that the deal would also remove an important challenger —T-Mobile USA—from the market, reducing pressure on its larger rivals to keep prices down and improve service.
"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," said Deputy Attorney General James Cole.
"This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition."
In a statement, AT&T said it was "surprised and disappointed" by the government's suit. "We intend to vigorously contest this matter in court," said Wayne Watts, AT&T's general counsel. He said the merger was in the best interests of consumers and would allow AT&T to expand its fourth-generation wireless network to 97% of the U.S. population.
The Justice Department left the door open for AT&T to propose remedies to the deal. The acting chief of the department's antitrust division, Sharis Pozen, said at a news conference that the companies have been in constant discussions with the department, and she did not foreclose the possibility of an eventual settlement.
"We apprised them of our serious concerns, and as any party can do, our door is open," Ms. Pozen said. If they want to resolve those concerns, we can certainly do that. Here we filed a lawsuit and we'll proceed in court. We'll see what happens next."
The proposed tie-up has faced tough opposition from consumer groups and No. 3 carrier Sprint Nextel Corp. since it was announced in March. Shares of AT&T were down more than 4% on the announcement.
Shares of Sprint, which is seen as a likely victim of an enlarged AT&T, rose 8%. The Federal Communications Commission also has been conducting an extended review of the proposed merger.
The FCC wasn't as far along with its review, which looks at whether the deal would be in the public interest. But FCC Chairman Julius Genachowski said Wednesday that "although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition."
The FCC will "continue to work on the review but we won't undermine DOJ's process," an FCC official said Wednesday. The FCC has never approved a deal that the Justice Department has rejected.
Regulators signaled from the start that the deal raised significant competitive questions. Earlier this summer, AT&T tried to address those questions by introducing new economic data that it said showed the deal would boost efficiency.
Ms. Pozen, the acting antitrust chief, said the Justice Department looked closely at all the companies' submissions, but "at the end of the day, taking out an innovator, a value pricer like T-Mobile, caused us concern."
AT&T argued that the deal was in the country's best interest because it would be able to use T-Mobile's towers and airwaves to expand high-speed wireless Internet service across most of the U.S. AT&T also argued that the deal would create new jobs because of expanded broadband access.
On Wednesday, AT&T announced plans to move 5,000 T-Mobile call center jobs back to the U.S. after the deal's completion, in another appeal to regulators. The company's announcement came just hours before the Justice Department filed its lawsuit.
US government sues to block AT&T, T-Mobile merger
The Justice Department on Wednesday sued to block AT&T Inc.'s proposed $39 billion takeover of T-Mobile USA, saying the combination of the second- and fourth-largest U.S. cellphone companies would hurt competition and likely raise prices.The antitrust challenge comes shortly after the Obama administration also blocked Nasdaq OMX Group's proposed offer for NYSE Euronext and shows its desire to put new teeth into antitrust enforcement after what it says was lax enforcement under the previous administration.
The deal would create a giant in mobile telephony that AT&T has argued would provide better service to more of the country.
But the Justice Department said in its suit that the deal would also remove an important challenger —T-Mobile USA—from the market, reducing pressure on its larger rivals to keep prices down and improve service.
"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," said Deputy Attorney General James Cole.
"This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition."
In a statement, AT&T said it was "surprised and disappointed" by the government's suit. "We intend to vigorously contest this matter in court," said Wayne Watts, AT&T's general counsel. He said the merger was in the best interests of consumers and would allow AT&T to expand its fourth-generation wireless network to 97% of the U.S. population.
The Justice Department left the door open for AT&T to propose remedies to the deal. The acting chief of the department's antitrust division, Sharis Pozen, said at a news conference that the companies have been in constant discussions with the department, and she did not foreclose the possibility of an eventual settlement.
"We apprised them of our serious concerns, and as any party can do, our door is open," Ms. Pozen said. If they want to resolve those concerns, we can certainly do that. Here we filed a lawsuit and we'll proceed in court. We'll see what happens next."
The proposed tie-up has faced tough opposition from consumer groups and No. 3 carrier Sprint Nextel Corp. since it was announced in March. Shares of AT&T were down more than 4% on the announcement.
Shares of Sprint, which is seen as a likely victim of an enlarged AT&T, rose 8%. The Federal Communications Commission also has been conducting an extended review of the proposed merger.
The FCC wasn't as far along with its review, which looks at whether the deal would be in the public interest. But FCC Chairman Julius Genachowski said Wednesday that "although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition."
The FCC will "continue to work on the review but we won't undermine DOJ's process," an FCC official said Wednesday. The FCC has never approved a deal that the Justice Department has rejected.
Regulators signaled from the start that the deal raised significant competitive questions. Earlier this summer, AT&T tried to address those questions by introducing new economic data that it said showed the deal would boost efficiency.
Ms. Pozen, the acting antitrust chief, said the Justice Department looked closely at all the companies' submissions, but "at the end of the day, taking out an innovator, a value pricer like T-Mobile, caused us concern."
AT&T argued that the deal was in the country's best interest because it would be able to use T-Mobile's towers and airwaves to expand high-speed wireless Internet service across most of the U.S. AT&T also argued that the deal would create new jobs because of expanded broadband access.
On Wednesday, AT&T announced plans to move 5,000 T-Mobile call center jobs back to the U.S. after the deal's completion, in another appeal to regulators. The company's announcement came just hours before the Justice Department filed its lawsuit.
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