31
Aug
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In the ongoing saga that is the AT&T and T-Mobile merger, yet another bump in the road has surfaced. This time it's directly from the United States government, who says that if the AT&T/T-Mobile merger were to go through, it would "remove a significant competitive force from the market." As a result, the U.S. has filed an antitrust complaint looking to block the proposed deal.

While this doesn't mean a guaranteed rejection, it is most definitely going to make progress much harder for Ma Bell. If the estimated $39 billion deal does get rejected, however, AT&T will still have to pay $3 billion to Deutsche Telekom, the owner of T-Mobile USA, as well as provide T-Mo with wireless spectrum in some areas and reduced charges for use of AT&T's network.

For more information, including legal justifications, check out the press release below.

Update: Both AT&T and Sprint responded to DoJ's move.

A&T:

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.

At the end of the day, we believe facts will guide any final decision and the facts are clear. This merger will:

· Help solve our nation’s spectrum exhaust situation and improve wireless service for millions.
· Allow AT&T to expand 4G mobile broadband to another 55 million Americans, or 97% of the population;
· Result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.

We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.

Sprint:

The DOJ today 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. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision – one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.

[Bloomberg via Android and Me; Department of Justice)

Justice Department Files Antitrust Lawsuit to Block AT&T’s Acquisition of T-Mobile

Transaction Would Reduce Competition in Mobile Wireless Telecommunications Services, Resulting in Higher Prices, Poorer Quality Services, Fewer Choices and Fewer Innovative Products for Millions of American Consumers

WASHINGTON – The Department of Justice today filed a civil antitrust lawsuit to block AT&T Inc.’s proposed acquisition of T-Mobile USA Inc. The department said that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.

The department’s lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.

“The combination of AT&T and T-Mobile 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,” said Deputy Attorney General James M. Cole. “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

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

Mobile wireless telecommunications services play a critical role in the way Americans live and work, with more than 300 million feature phones, smart phones, data cards, tablets and other mobile wireless devices in service today. Four nationwide providers of these services – AT&T, T-Mobile, Sprint and Verizon – account for more than 90 percent of mobile wireless connections. The proposed acquisition would combine two of those four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing.

According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation’s largest 100 cellular marketing areas. They also compete nationwide to attract business and government customers. AT&T’s acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace.

The complaint cites a T-Mobile document in which T-Mobile explains that it has been responsible for a number of significant “firsts” in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi “hotspot” access, and a variety of unlimited service plans. T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology. The complaint states that by January 2011, an AT&T employee was observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims.”

The complaint details other ways that AT&T felt competitive pressure from T-Mobile. The complaint quotes T-Mobile documents describing the company’s important role in the market:

  • T-Mobile sees itself as “the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market”; and

  • T-Mobile’s strategy is to “attack incumbents and find innovative ways to overcome scale disadvantages. [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small. Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . .”

The complaint also states that regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers. And, the department said that any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction’s anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction. The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers. Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

AT&T is a Delaware corporation headquartered in Dallas. AT&T is one of the world’s largest providers of communications services, and is the second largest mobile wireless telecommunications services provider in the United States as measured by subscribers. It serves approximately 98.6 million connections to wireless devices. In 2010, AT&T earned mobile wireless telecommunications services revenues of $53.5 billion, and its total revenues were in excess of $124 billion.

T-Mobile, is a Delaware corporation headquartered in Bellevue, Wash. T-Mobile is the fourth-largest mobile wireless telecommunications services provider in the United States as measured by subscribers, and serves approximately 33.6 million wireless connections to wireless devices. In 2010, T-Mobile earned mobile wireless telecommunications services revenues of $18.7 billion. T-Mobile is a wholly-owned subsidiary of Deutsche Telekom AG.

Deutsche Telekom AG is a German corporation headquartered in Bonn, Germany. It is the largest telecommunications operator in Europe with wireline and wireless interests in numerous countries and total annual revenues in 2010 of €62.4 billion.

Cameron Summerson
Cameron is a self-made geek, Android enthusiast, horror movie fanatic, and musician. When he's not pounding keys here at AP, you can find him spending time with his wife and kids, plucking away on the 6- or 7-string, or watching The Texas Chainsaw Massacre on repeat.

  • Warren

    Hot damn! Finally the federal government doing something in the best intrest of its citizens!

  • http://tcfpodcast.tk/ John F

    Hopefully it doesn't go through and AT&T will lower their bill prices.

  • MerlinZero

    Well damn, I was really hoping to see Ma-Bell at some point in my life... my dreams are crushed :(

  • lincthra

    Perhaps I'm becoming a conspiracy theorist in my old age, but the fact that the US Gov't is actually doing something right in regards to big businesses like this makes me downright suspicious. *LOL*

  • Android Ninja 4

    Good im glad, they dont need to let them merge. AT&T is crappy anyway, idk why so many people like them.

    • Carpatus

      Nobody actually likes them, except maybe the high up execs. People just tolerate them because, for a while, they were the only one with the iPhone.

  • Meh…

    Here's to hoping T-Mobile is in bad financial straights and has to liquidate operations and all the employees are let go without prejudice. As well as consumers are released to the wild to find new providers in a less monopolistic selection process

    • Chris

      So turning the mobile game into a three-player field from a four-player field is going to make things less monopolistic?

      If T-Mobile bites the dust, those customers are all going to be stuck going to one of the remaining national networks, likely AT&T if they want to keep their phone, and they don't even get to grandfather in their unlimited plans like they probably would have if the merger went through.

      That aside, the $3 billion breakup fee and new spectrum stipulations in the present contract will put T-Mobile on stronger footing than ever. It could give them the cash and spectrum to roll out a true 4G network.

      • Topgun

        They wouldn't be able to keep their current phones. ATT and Tmobile use different radios on their networks there-for most phones wont work unless their radio is capable. (All Tmo phones are not some ATT phones will work on tmo)

        • Chris

          Presumably, T-Mobile's assets and spectrum wouldn't magically disappear, and most likely would be acquired by AT&T, which is the only company that can use those assets. Verizon and Sprint would both be bidding on the spectrum alone, as the equipment and network are useless, and regional networks just don't have the cash to get into the game.

          That is of course assuming some other player doesn't decide to get in on the market, or the FCC/DOJ blocks the acquisition.

          Almost all AT&T phones would work to some degree on T-Mobile's network, since T-Mobile's 2100 MHz and 1800 MHz bands are standard on GSM chipsets nowadays. They wouldn't necessarily get maximum speed, but any AT&T GSM phone that can be used abroad can be used on T-Mobile's network.

          There's a good chance AT&T would operate T-Mobile's network at least temporarily to attract customers and reduce AT&T's notorious network congestion. The infrastructure is all there, all they have to do is man it again.

  • http://silverfang77.tumblr.com Silver Fang

    I hope the merger doesn't go through. It's about time the public interest took priority over corporate profits.

    I also wish the FTC, FCC or someone else would stop the telecoms from forcing tiered data and speed restrictions on users.

    • Chris

      Telecoms can put restrictions on data; the FCC/FTC telling them they can't is like saying electrical companies can't charge per kilowatt hour or charge more during peak usage times. It does ultimately cost these companies money to provide services, although these costs are far less than companies claim.

      However, this does not mean they get to charge any rate they want like they're doing now, nor should they have the right to arbitrarily change customer contracts. Tethering shouldn't be an additional charge either.

      Ideally, customers would pay a reasonable amount for a reasonable amount of data and be allowed to do whatever they want with it, just like utilities. Water companies don't charge more if you want to use the water to wash your car or water the lawn, you just pay for the water you use regardless of actual use. If I want to use the data plan I'm paying for with my computer, I should be able to without any additional charge.

  • Vinny

    Very happy to hear that maybe, just maybe T-Mobile will be sticking around. They are without a doubt far and away a much better company then AT&T. I would hate to have to be involved with AT&T. In my area (suburb of Boston) T-Mobile is pushing over 9mb download speeds and 3.5mb upload speeds. In comparison AT&T can not even give us 600 killabits download and 200 killabits upload. This is Boston, tech companies are bullshit that AT&T is the slowest carrier in the country. In today market those speeds are unacceptable. The worst part about this is AT&T has our area as being HSPA+, call them and they will swear to it. AT&T IS COMPLETELY UNBELIEVABLE.

  • Deltaechoe

    This made me laugh, finally a big evil corporation is getting a slap in the face. Could this be the start of something new and amazing for consumers?

  • Perry Ahern

    It's very interesting that AT&T recently promised that the merger would create 5,000 jobs, but now that there's a threat to it from the government itself they're saying "tens of thousands of jobs." The promised employment benefit at least quadrupled (20,000+) when AT&T felt a need to defend the "merger" plan.

  • Karzdan

    Funny, AT&T used the word 'facts' I don't think it means what they think it means.

  • EngineerGA

    If AT&T can possibly spin their way out of this, we know for sure that dollars will buy anything - even a blind eye from government oversight. I don't see how anyone with two brain cells that aren't affected by greed could possibly say that the number 2 and number 4 carriers (customer-base-wise) joining to create a huge carrier could possibly benefit customers. Reduce the number of competitors in the market and benefit customers... um, how does that work? Depleted spectrum... boohoo. Next time bid/win more at the auction like the other guys.

    And how could two companies that do similar work joining create *new* jobs? Every other carrier merge has meant *lost* jobs for redundant workers. The big companies call it "expense savings from synergy" - meaning the guy at the little company who does the same thing as the guy from the big company loses his job, and the big company gets to keep the money they would have paid him.

  • gdwhite85

    Yeah.......Buddy!!! Don't go thru. We T-Mob cust want nothing to do w/ AT&T

  • Jason

    I don't want ANYTHING to do with AT&TURD myself. Documents accidentally released by AT&TURD already show they could build out their network for about a 10th of what it would cost to buy T-Mobile.

    STICK IT TO AT&TURD DOJ!!!!!!!!

  • Chris

    Rather glad this isn't going through. AT&T's plans are terrible, their service even worse, but I need a GSM phone for traveling abroad. Yes, Verizon has a tiny handful of GSM/CDMA dual-radio phones, but the selection is extremely limited. Same issue with Sprint, and choosing one or the other means picking either speed (from Verizon's LTE) or capacity (from Sprint's unlimited plans).

    That aside, it does open the suggested possibility of a Google acquisition to create the world's first completely integrated information company, from hardware to software and even the network itself.

    The odds are of course rather low at best; the T-Mobile deal is three times the size of Google's Motorola acquisition and not something even Google's vast war chest could afford easily, and it would likely have the same potential alienation effect as Google entering the manufacturing business as carriers would stop selling Android phones. There's also the potential for anti-trust issues of its own if Google controlled every step of the process.

  • L boogie

    The value t-mobile provides has a significant impact on the mobile industry where at&t is the opposite and to pull off an outcry of initiating additional investment to create more jobs and such ilk to sway the justice department is quite low. They've always had the opportunity to create spectrum networks/ towers to compete with other carriers but would rather acquire another carrier rather than improving their own infrastructure. To t-mobile customers/ staff, here's hoping that the final official decision is victorious on your behalf cuz if at&t wins, unemployment offices & soup kitchens would be going into overtime more than usual.

  • Jason

    now a google buyout of tmobile is a really good idea!!!!!!!

  • http://SPOOLEDUPRACING.COM Aaron

    I will leave Tmobile if AT&T buys them out. I bet many others will too.

  • kable

    T-Mobile US is on its way out one way or the other. Either ATT buys them, Sprint buys them or they close their doors.

    It's not like TMO will suddenly start doing well if this merger fails. There is a reason it is forsale. How would Sprint buying it be any better?