Uncle Sam moves to block AT&T/T-Mobile merger, says it would “substantially lessen competition” in the U.S.

Bloomberg reports that the U.S. government has made a move to block the proposed merger of AT&T and T-Mobile USA valued at $39 billion:

The U.S. government sued to block AT&T Inc.’s proposed $39 billion acquisition of T-Mobile USA Inc., saying the deal would “substantially lessen competition” in the wireless market.

The publication writes that the Justice Department filed a complaint Wednesday in federal court in Washington. The government is arguing that the proposed transaction would effectively legitimize duopoly in the country, adding in its filing that “AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market”.

The government’s reasoning reasonates with Sprint, the nation’s third-largest wireless operator, which asked Uncle Sam to intervene on the grounds that the resulting super carrier would prevent any meaningful competition on the market. AT&T denied Sprint’s accusations and said the merger would lead to fewer dropped calls and cheaper data plans for customers.

This is my next has a statement from FCC chairman Julius Genachowski who expressed “serious concerns” about competition:

By filing suit today, the Department of Justice has concluded that AT&T’s acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws. 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. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices.

 

If the transaction does indeed get rejected, T-Mobile USA will walk out with…

…first, three billion dollars in cash in its pockets, which is the sum AT&T pledged to pay if regulators reject the transaction. Then there are reduced charges T-Mobile USA would get for calls that get tunneled through the AT&T network. Finally, Deutsche Telekom-owned carrier, the fourth largest in the U.S., would also enjoy AT&T’s wireless spectrum in some regions, resulting in better coverage for users on the T-Mobile network.



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