Wednesday, August 31, 2011

Department of Justice Seeks to Block AT&T’s Acquisition of T-Mobile

This posting was written by John W. Arden.

The U.S. Department of Justice filed a civil antitrust lawsuit today to block AT&T’s proposed $39 billion acquisition of T-Mobile USA Inc. from Deutsche Telekom AG.

The deal would combine the second and fourth largest providers of mobile wireless service, substantially lessen competition for wireless telecommunications services across the U.S., and result in higher prices, poorer quality of services, fewer choices, and less innovation for millions of American consumers, according to the Department of Justice news release.

Currently, four nationwide providers of mobile wireless services—Verizon, AT&T, Sprint, and T-Mobile—account for more than 90 percent of the national market. T-Mobile has historically challenged the top three competitors by providing value, innovation, and aggressive pricing, the Justice Department said.

“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 Attorney General in charge of the Department of Justice Antitrust Division. “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.”

The complaint, filed in the federal district court in Washington, D.C., alleges that “AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market” and “substantially reduce competition.”

The relevant product market was alleged as mobile wireless telecommunications services and, alternatively, mobile wireless telecommunications services provided to enterprise and government customers. The relevant geographic market was defined as local areas approximating cellular market areas (CMAs) identified by the Federal Communications Commission to license providers for certain spectrum bands. According to the Justice Department, AT&T and T-Mobile compete in approximately 97 of the nation’s top 100 CMAs. Each of these 97 CMAs was alleged to constitute a relevant geographic market.

The case is U.S. v. AT&T Corp., T-Mobile USA, Inc., and Deutsche Telekom AG, 1:11-cv-01560.

In a statement released today, AT&T expressed surprise at the filing of the lawsuit and declared an intention to ask for an expedited hearing, “so the enormous benefits of this merger can be fully reviewed.” The company plans to “vigorously contest this matter in court.”

Further analysis of this development (“AT&T’s Planned Acquisition of T-Mobile Challenged by Justice Department” by Jeffrey May) appears here on the AntitrustConnect blog.

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