Wednesday, August 31, 2011

There will be no merger of AT&T and T-Mobile...

...if the federal government gets its way.

As the New York Times reports, the Justice Department announced today it is seeking to block the planned merger of the second- and fourth-largest cellular phone companies.
AT&T said it would fight the lawsuit. “We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed,” the company said in a statement. “The D.O.J. has the burden of proving alleged anti-competitive effects and we intend to vigorously contest this matter in court.”
AT&T said it had no warning that the government was going to file to block the merger, because it has been actively involved in discussions with both the Justice Department and the Federal Communications Commission since the proposal was announced in March. AT&T has indicated that it would consider some divestitures or other business actions to allow the deal to go forward.
But Justice Department officials said that those discussions led it to believe that it would difficult to arrange conditions under which the merger could proceed. “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer,” said Sharis A. Pozen, acting assistant attorney general in charge of the Justice Department’s antitrust division.
The question of what's next is examined in this Bloomberg story. Mother Jones notes the immediate fallout from the government's decision.
Back in July, AT&T—which has spent millions in lobbying and campaign contributions in support of the deal—filed a report with the Federal Communications Commission claiming that the merger would result in lower prices, increased service in metropolitan areas, and 5,000 new, "in-sourced" jobs, Bloomberg News reports. But the DOJ begs to differ, alleging that the merger violates anti-trust law. Removing a low-cost carrier like T-Mobile from the market would result in drastically reduced competition, less choice, and higher prices for wireless customers, the Justice Department argues.
AT&T has plenty at stake if regulators strike down the deal. AT&T shares fell by 5 percent after the suit was announced. And if regulators reject the merger, the company would have to cough up $3 billion in cash to T-Mobile's Germany-based parent company. It would also have to hand over wireless spectrum, among other things, to T-Mobile, in a package valued at $7 billion.

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