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WASHINGTON (AP) — The Justice Department filed suit Wednesday to
block AT&T’s $39 billion deal to buy T-Mobile USA on grounds
that it would raise prices for consumers.
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The government contends that the acquisition of the No. 4 wireless
carrier in the country by No. 2 AT&T would reduce competition
and that would lead to price increases.
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At a news conference, Deputy Attorney General James Cole said the
combination 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.”
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The lawsuit seeks to ensure that everyone can continue to receive
the benefits of competition, said Cole.
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AT&T said it would fight and ask for an expedited court hearing
“so the enormous benefits of this merger can be fully reviewed.”
The company said the government “has the burden of proving alleged
anti-competitive effects, and we intend to vigorously contest this
matter in court.”
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Four nationwide providers – Verizon, AT&T, T-Mobile and Sprint
– account for more than 90 percent of mobile wireless
connections.
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T-Mobile has been an important source of competition, including
through innovation and quality enhancements such as the roll-out of
the first nationwide high-speed data network, according to Sharis
Pozen, acting chief of Justice’s antitrust division.
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Mobile wireless telecom services play an increasing role in
day-to-day communications, with more than 300 million smart phones,
data cards, tablets and other mobile wireless devices in
use.
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Deutsche Telekom, the owner of T-Mobile, had no immediate
comment.
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The proposed cash-and-stock transaction would catapult AT&T
past Verizon Wireless to become the nation’s largest wireless
provider, and leave Sprint Nextel Corp. as a distant number
three.
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In a statement, Sprint said the Justice Department’s lawsuit
“delivered a decisive victory for consumers, competition and our
country. By filing suit to block AT&T’s proposed takeover of
T-Mobile, the DOJ has put consumers’ interests first.”
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AT&T and T-Mobile compete nationwide, in 97 of the largest 100
cellular marketing areas, according to the suit filed in U.S.
District Court in Washington. They also vie for business and
government customers.
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The suit says AT&T’s acquisition of T-Mobile would eliminate a
company that has been a competitive factor through low pricing and
innovation. T-Mobile had the first handset using the Android
operating system, Blackberry wireless email, the Sidekick smart
phone, national Wi-Fi “hotspot” access and a variety of unlimited
service plans.
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In support of its case, the department quoted an unidentified
AT&T employee on a competitive issue, the sophisticated
wireless broadband devices that can provide high-speed data
connections. The AT&T employee, according to the suit, noted
that T-Mobile was first to have such devices in its portfolio and
that “we added them in reaction to potential loss of speed
claims.”
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Federal Communications Commission chairman Julius Genachowski said
the record before his agency “raises serious concerns about the
impact of the proposed transaction on competition.” The FCC’s
separate review of the proposed merger is not complete.
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Commission member Michael Copps, a Democrat and a staunch opponent
of industry consolidation, said that he shares “the concerns about
competition and have numerous other concerns about the public
interest effects of the proposed transaction, including consumer
choice and innovation.”
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Democratic Sen. Herb Kohl of Wisconsin, who heads the Senate
Judiciary subcommittee on antitrust, competition policy and
consumer rights, said the suit was an effort to protect consumers
“in a powerful and growing industry that reaches virtually every
American.”
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The suit used some of T-Mobile’s own documents describing its role
in the market to explain why the merger shouldn’t take place. In
those documents, the company calls itself “the No. 1 challenger of
the established big guys in the market and as well positioned in a
consolidated 4-player national market.”
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T-Mobile said its strategy is to attack other companies and find
innovative ways to overcome the fact that it is a smaller
company.
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T-Mobile “will be faster, more agile and scrappy, with diligence on
decisions and costs both big and small,” one company document said.
“Our approach to market will not be conventional, and we will push
to the boundaries where possible.”
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Since AT&T first announced the deal in March, it has insisted
that consumers would have a choice of multiple wireless providers,
including Leap, Metro PCS and U.S. Cellular, in many markets even
if the deal is approved.
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But the department rejected that argument. It said regional
providers face “significant competitive limitations” because they
do not have national networks. The department said the enormous
investments and resources needed to acquire wireless spectrum and
build a network make it very difficult for new companies to enter
the wireless market.
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AT&T and T-Mobile also have said the merger would reduce
dropped and blocked calls, and speed mobile Internet connections
for subscribers. Faster service would result by combining their
limited wireless spectrum holdings at a time when both companies
are running out of airwaves to handle mobile apps, online video and
other bandwidth-hungry services.
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Finding more airwaves to keep up with the explosive growth of
wireless broadband services is a priority of the FCC and the Obama
administration.
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But the Justice Department said AT&T could “obtain
substantially the same network enhancements … if it simply
invested in its own network without eliminating a close
competitor.”
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—
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Online:
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