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August 31st, 2011 
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The U.S. government is suing to block AT&T’s pending merger with T-Mobile, putting the finalization of the deal in doubt.
The Department of Justice argues AT&T’s purchase of the Deutsche Telekom unit would violate U.S antitrust law and “substantially lessen competition” in the wireless market, according to Bloomberg. AT&T’s stock fell five percent after the government filed its official complaint.
“AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the U.S. regulatory body said in its filing.
Analysts say AT&T may still negotiate with the Justice Department to push the deal through, but the U.S. government’s actions don’t bode well for the carrier and casts a large shadow over its hopes to expand.
If regulators reject the deal, AT&T would be forced to pay $3 billion to Deutsche Telekom as part of its pre-nup agreement with the smaller wireless network. The carrier would also have to give T-Mobile free spectrum in some regions and reduce charges for T-Mobile customers who make calls to AT&T subscribers.
T-Mobile has been floundering of late, but added spectrum and disassociation from AT&T could give the carrier a boost. AT&T is ranked last in customer service support, while T-Mobile is ranked first. A failed merger would allow T-Mobile to keep its reputation as a low-cost, well-regarded carrier intact.
Sprint is likely cheering the Justice Department’s move as well. Sprint CEO Dan Hesse continues to express concerns his company will be unable to compete in a post-merger market. A failed merger would keep the carrier from falling into a very distant last place in the U.S. wireless business. Sprint also has new plans on the horizon that may allow it to close the gap between itself and competitors, especially if the merger fails.
The merger’s critics overall call the deal anticompetitive and say it would give Verizon and AT&T a duopoly in the U.S. market. With no smaller carrier offering low prices and network improvements to compete with, carriers may implement high prices and see innovation of cell networks slowed down.
Despite the U.S. government’s new lawsuit, AT&T has been active in its attempt to make a case for merger approval. The carrier hired bankers to sell $8 billion worth of its assets to help secure government approval for the merger and recently promised to bring 5,000 wireless call-center jobs back to the United States if the deal goes through.
AT&T also said the merger would not result in any job losses for U.S-based wireless call-center employees, but none of the company’s bargaining was enough to prevent the government’s lawsuit.
The tech community has been bracing for a post-merger world for months, but if the U.S. government has its way, things may not change much at all.
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