AT&T To Fight Justice Dept. Over Merger Blockage

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Washington - The U.S. Department of Justice filed a suit in a U.S. District Court here to block AT&T's proposed merger with T-Mobile, calling the merger anticompetitive.

AT&T said it would contest the action and ask the court for an "expedited hearing" on the complaint, a copy of which is available here.T-Mobile has not commented.

AT&T's acquisition of T-Mobile, the department said, "would eliminate a company that has been a disruptive force through low pricing and innovation."

For his part, Federal Communications Commission (FCC) chairman Julius Genachowski said he has serious doubts about the merger. Although the FCC hasn't completed its own review of the proposal, he said, "the record before this agency also raises serious concerns about the impact of the proposed transaction on competition."

"Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile," Genachowski said he continued. "Competition fosters consumer benefits, including more choices, better service and lower prices."

In its own analysis, the Justice Department contended that 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." In fact, the department claimed, "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."

The merger, the department concluded, "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 cited T-Mobile's role as "a value provider offering particularly aggressive pricing" and the carrier being the first in the U.S. to launch multiple services or products, including the first Android smartphone, Blackberry wireless email, national Wi-Fi hot spot access, HSPA+ technology, and a variety of unlimited service plans.

The department also cited internal AT&T documents pointing out that the ways AT&T felt competitive pressure from T-Mobile. In one instance, an AT&T employee said in one document that "[T-Mobile] was first to have HSPA+ devices in their portfolio ... we added them in reaction to potential loss of speed claims."

Neither regional carriers nor potential new entrants will offset the merger's negative impact on competition, the department continued. 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," the department said. Potential new carriers "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 concluded.

AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation's largest 100 markets, and compete nationwide to attract business and government customers, the department noted.

"Were the merger to proceed," said Deputy Attorney General James M. Cole, "there would only be three providers with 90 percent of the market, and competition among the remaining competitors on all dimensions -- including price, quality and innovation -- would be diminished."

Wayne Watts, AT&T senior executive VP and general counsel, begged to differ. "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," he said.

AT&T plans to ask for "an expedited hearing so the enormous benefits of this merger can be fully reviewed," he continued. "The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court."

The merger, he reiterated, will help solve the nation's "spectrum exhaust situation," improve wireless service, and enable AT&T to expand 4G LTE mobile broadband to another 55 million people, or 97 percent of the population.

A merger would also produce "billions of additional investment and tens of thousands of jobs at a time when our nation needs them most," he claimed.


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