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Government sues to block AT&T, T-Mobile merger

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Government sues to block AT&T, T-Mobile merger

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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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Online:

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Justice Department’s lawsuit: 

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