Wednesday, August 31, 2011

AT&T surprised by DoJ attempt to block T-Mobile acquisition

The Justice Department has filed a lawsuit to block the proposed AT&T acquisition of T-Mobile USA. T-Mobile USA is a subsidiary of Deutsche Telekom AG.

The complaint filed in federal court in Washington, D.C. seeks a declaration that AT&T’s acquisition of T-Mobile would violate U.S. antitrust law. The government is also asking for an injunction blocking any implemention of the deal.

In its complaint, the government stated that the acquisition would “substantially lessen competition” in the wireless market. It's something Sprint, the nation's No. 3 wireless carrier, has been saying for some time.

At the same time, the Federal Communications Commission (FCC) agreed that it, too, had reservations about the deal. However, the FCC has not yet completed its review.

AT&T is currently the nation's No. 2 carrier, behind Verizon. T-Mobile USA is the No. 4 carrier in the nation; a deal combining the two would put AT&T clearly in the No. 1 position in the U.S., but Verizon has not voiced any opposition to the deal.

If approved, the $39 billion merger would have concentrated 80 percent of the U.S. wireless carrier market between the combined AT&T / T-Mobile USA and Verizon Wireless.

If the deal is blocked, AT&T would have to pay Deutsche Telekom $3 billion in cash. It would also be required to provide T-Mobile USA with wireless spectrum in some regions and reduced charges for calls into AT&T’s network, with the total package valued at as much as $7 billion, Deutsche Telekom said earlier this month.

AT&T said it was surprised by the DoJ's action. In a statement, the company said,
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.
The benefits for AT&T are clear: it planned to use T-Mobile's portion of the wireless spectrum to advance its LTE rollout. In addition, AT&T has promised to bring 5,000 wireless call-center jobs (translation: low-paying) back to the United States if the acquisition wins approval.

Hollywood's Largest On-line Gift StoreHowever, it is certain that certain (much higher-paying) jobs that would overlap between the two carriers, such as sales and marketing, would see layoffs in the U.S.

As a result of the announcement, AT&T shares are down about 4.5 percent at the time of this writing. Sprint shares, meanwhile, are up over 7 percent, while Verizon is largely unchanged.

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