DOJ Blocking AT&T/T-Mobile Merger


Food fight! – Animal House

The United States Department of Justice today filed a civil antitrust lawsuit to block AT&T’s proposed acquisition of T-Mobile USA. The Deputy Attorney General James Cole said the merger meant higher prices and less competition. The DOJ’s complaint (pdf, 25 pages), was filed Wednesday in federal court in Washington, D.C.

The Justice 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 FCC and the Justice Department are reviewing the proposed $39 billion purchase by AT&T of smaller rival T-Mobile USA, a unit of Deutsche Telekom AG.

The U.S. is seeking a declaration that Dallas-based AT&T’s takeover of T-Mobile, a unit of Deutsche Telekom, would violate U.S. antitrust law. The U.S. also asked for a court order blocking any arrangement implementing the deal.

AT&T, in a press release said, “We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.”

Sprint, in a press release said, “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.”

FCC Chairman Julius Genachowski said today, “Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition.”

If regulators reject the deal, which would create the biggest U.S. wireless carrier, AT&T would have to pay Deutsche Telekom $3 billion in cash. It would also provide T-Mobile USA with wireless spectrum in some regions and reduced charges for calls into AT&T’s network, for a total package valued at as much as $7 billion, Deutsche Telekom said this month.

“Given the size of the cancellation fee that was negotiated into his agreement, AT&T has the incentive to fight,” said Andrew Gavil, a law professor at Howard University in Washington. “The fact that the Justice Department is challenging the deal doesn’t mean they won’t negotiate a resolution at some point.”

The Yankee Group says (pdf) that eliminating T-Mobile as a competitive force would cause overall wireless bills to climb in many major markets, in some cases by more than $8 a month.

The merger would combine the second- and fourth-largest carriers to create a new market leader ahead of No. 1 Verizon Wireless. The new company would have dwarfed current No. 3 carrier Sprint Nextel, which argued against the deal.

The Wall Street Journal maps out the family tree of US carriers.

AT&T accidentally let it slip, in a filing to the FCC (pdf), that AT&T was unwilling to spend the $3.8 billion it would cost to push LTE coverage from 80% of the country to 97% — yet the same argument was used to explain their need for a $39 merger with T-Mobile.

“I think T-Mobile will need to hook up or do as we do–partner with a Clearwire or others, or LightSquared, as we have done,” said Steve Elfman, president of Sprint’s network operations, in an interview with the Seattle Times.

Okay, how about a T-Mobile and Dish Networks deal. That seems synergistic. T-Mobile could then enable national LTE service on Dish’s 40 MHz of 2.1 GHz spectrum. T-Mobile and Dish could offer a voice and video bundle.

SpectrumCo’s AWS frequencies – owned by Cable operators – might now be sold to T-Mobile, speculates Tim Farrar. T-Mobile could use the 19 MHz that SpectrumCo isn’t using, and their AWS (1.7/2.1 Ghz) spectrum would also compliment Dish’s 40 MHz of 2.2 GHz Mobile Satellite Spectrum for LTE. One antenna could deliver it all.

A Sprint/T-Mobile merger, in contrast, might have:

  • A 28% market share, compared to 31.9% (AT&T) and Verizon (31.1%)
  • Access to 100 Mbps “wireless cable” and “world phone” service at 2.6 GHz
  • A potential 40-60 GHz from combined AWS & 2.6 GHz spectrum
  • Economies of scale and integration
  • Bonus Bucks from spectrum sales (Sprint) and failed merger (T-Mobile)

Either a Dish/T-Mobile or Sprint/T-Mobile deal would provide more growth potential than the ill-conceived $39B merger with T-Mobile which offered little spectral advantage.

In a related news, AT&T vowed to bring back 5,000 wireless call-center jobs if the deal is approved. It’s not clear whether that would happen before or after AT&T lays off 10,000 T-Mobile phone store employees. On page 51 of AT&T’s filing with the FCC (pdf), AT&T says the deal would save it $3 billion a year starting three years after it was complete by “optimizing” the combined company’s retail and distribution networks.

Related Dailywireless articles include; AT&T Merger: More Heat, AT&T Merger: Yea & Ney, FCC Receives Pro & Con Support for ATT Merger, LTE Spectrum: It’s War , Spectrum Drama: Made for TV, AT&T MediaFLO Spectrum: More Review, T-Mobile Cuts Prices, FCC: Show Us Your Spectrum Scarcity, AT&T, Combining AWS and 700 MHz: Why?, Comparing Data Plans, ATT Announces First LTE Modems, T-Mobile Goes to 42 Mbps, AT&T Declares Spontaneous “4G” Transformation, More U.S. LTE Cities July 21, T-Mobile Makes Its (4G) Move , Multicarrier HSPA, WiMAX – Release 2.0 T-Mobile: LTE in the Future?, Multicarrier HSPA, FCC: Spectrum for Sale, AT&T Data Caps Extend to Femtocells, AT&T’s New Data Plans, T-Mobile: Now HSPA+ Coverage for 75M, Public Safety: Show Us The Money, Clear: No Limits, FCC to Okay $2.3B AT&T Deal, Cellcos: One Thing – Bandwidth

Posted by Sam Churchill on .

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