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.
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.
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."
The lawsuit seeks to ensure that everyone can continue to receive the benefits of competition, said Cole.
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."
Four
nationwide providers — Verizon, AT&T, T-Mobile and Sprint — account
for more than 90 percent of mobile wireless connections.
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.
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.
Deutsche Telekom, the owner of T-Mobile, had no immediate comment.
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.
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."
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.
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.
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."
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.
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."
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."
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."
T-Mobile said its strategy is to attack other companies
and find innovative ways to overcome the fact that it is a smaller
company.
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."
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.
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.
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.
Finding
more airwaves to keep up with the explosive growth of wireless
broadband services is a priority of the FCC and the Obama
administration.
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:
Justice Department’s lawsuit: http://tinyurl.com/44lx4qo
Copyright 2011 The Associated Press.
