UPDATED 10:47 EDT / AUGUST 31 2011

US Gov Roadblocks AT&T, T-Mobile Deal

AT&T is in trouble. The major hitch this time is neither a rival company nor a bunch of picketing employees—it’s the U.S. DOJ itself.  According to Bloomberg, the US Department of Justice has filed an anti-trust suit to jam the deal, claiming that it would “remove a significant competitive force from the market.”

AT&T already promised 5,000 jobs should the merger proceed, but it’s a deal that will only soothe what could be a potential problem, not solve it.  Om Malik’s thoughts about the deal echo that of DOJ’s sentiments.

“The biggest losers of this deal are going to be the consumers. While AT&T and T-Mobile are going to try to spin it as a good deal to combine wireless spectrum assets, the fact is, T-Mobile USA is now out of the market.

T-Mobile USA has been fairly aggressive in offering cheaper voice and data plans as it has tried to compete with its larger brethren. The competition has kept the prices in the market low enough. This has worked well for U.S. consumers. With the merger of AT&T and T-Mobile, the market is now reduced to three national players: AT&T, Verizon and Sprint. Net-net, U.S. consumers are going to lose.”

The deal would be quite advantageous for T-Mobile. It will receive a portion of AT&T’s existing wireless spectrum and reduces roaming rates on AT&T’s network while its parent company Deutsche Telekom will be paid a settlement of $3 billion.

The approval of the deal will be gravely disadvantageous to many companies including competitors, handset makers, and even Google.  However, if the merger doesn’t go through, AT&T will lose cash (to pay Deutsche Telekom at least $6 billion even if the deal is off), spectrum holdings and will be stripped off the chance to add to its AT&T LTE network expansion plans T-Mobile’s unique 170 MHz frequency.

Here is AT&T’s response the issue provided by senior executive VP and general counsel Wayne Watts:

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.

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