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Summary:

After the Department of Justice surprised pretty much everyone by suing to stop AT&T from acquiring T-Mobile, the nation’s No. 2 carrier isn’t taking defeat lying down. It has vowed to fight the suit in a statement released this morning.

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Updated: After the Department of Justice surprised pretty much everyone by suing to stop AT&T from acquiring T-Mobile, the nation’s No. 2 carrier isn’t taking defeat lying down. It has vowed to fight the suit in a statement released this morning. That in itself is unusual; generally when the Department of Justice says no, companies walk away from their deal (such as when Direct TV walked away from DISH back in 2002). But with $3 billion in cash and about $3 billion worth of spectrum on the table, AT&T is ready to fight.

From Wayne Watts, AT&T Senior Executive Vice President and General Counsel:

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 effects and we intend to vigorously contest this matter in court.

The statement continues with AT&T’s assurances that this deal will help solve the nation’s spectrum exhaust situation, which has been refuted by those who understand that adding T-Mobile’s existing spectrum to AT&T’s existing spectrum does not magically make more spectrum. AT&T also reminded lawmakers that the deal will create billions in investments and more jobs. A detailed refutation of those claims can be found here.

A quick read of the complaint shows that the DOJ looked at the merger not at a local level as has historically been the case in wireless merger agreements, but with an eye toward how this affects wireless coverage across the nation. Significantly, it realized the value of mobile data and competition in nationwide mobile broadband access as a reason that this deal would be harmful.

So now, AT&T will fight this in court, but if a case is not determined by Sept. 2012, AT&T will owe T-Mobile the $3 billion breakup fee as well as forfeit some spectrum it has in the AWS band according to Chris King, an analyst with Stifel Nicolaus. As for timing, he wrote:

DOJ does not need to seek a preliminary injunction (which has a higher burden of proof) because the companies cannot close while the case is still pending at the FCC. We would be astonished if the FCC were to approve the deal while litigation is pending before the District Court. This means that the likely next step is a discovery schedule and a trial scheduled. The trial schedule depends on the district court’s schedule. If approval is not provided by September 2012, we understand that AT&T is required to make the breakup payment to T-Mobile.

So now it’s time to watch a court battle royale and start asking ourselves, what happens to T-Mobile if it gets an infusion of cash from a breakup fee and more spectrum? Also, some of us will be asking, “Where the heck was the FCC in all of this?” The statement from Chairman Julius Genachowski reads like someone who has been asked a tough question and then replies with, “Um, yeah, what she said.”

Update: Based on a blog post over at Public Knowledge, which is of course, happy about the DoJ’s action, AT&T’s willingness to fight may not matter, and the FCC’s seeming inaction here shouldn’t last.

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  1. I do like how ATT dangled the “we’re going to add 5000 jobs because of inshoring” carrot this morning. But I’m going to guess than a lot more than 5000 will lose their jobs as result of the merger.

  2. ATT said:

    “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.”

    What they really meant was:

    “We are surprised and really pissed off because we have donated to just about every liberal special interest group, and we have contributed to the campaigns of hundreds of politicians, so we thought this was, unlike most of our customers, wired.

    We plan to increase our contributions and political pressure until the government caves in, because T-Mobile just charges too little and provides much better service than we do. “

    1. “donated to just about every liberal special interest group”

      Um, excuse me, your politics are showing.

      1. No, it’s not my politics. They made donations to many non-profits that were most likely to oppose the merger, and those non-profits are typically liberal. They didn’t have to buy off the Chamber of Commerce, because they were already in favor of big companies getting bigger, but they needed to get the approval of organizations that normally would be against monopolistic behavior.

  3. ATT……..what an arrogant, arrogant company. The only way they have been able to survive in the marketplace is sheer size.

  4. Wow… I’m flabbergasted (and delighted).

  5. ATT has every incentive to fight all the way to Sept 2012 to keep T-Mobile from finding an alternative plan. T-Mobile is in a tough spot, they will have to wait until Sept 2012 for the big payout, but their position in the wireless market will be weakening and employee morale will dip as well. I’m not certain the time lost for T-Mobile is worth the termination fee.

  6. Eleuterio Navarro Friday, September 2, 2011

    I’m simply SCHOCKED that ATT did’t get a free pass. Good for the DOJ for sticking to these arrogant bastards. I have been with Tmobile for years and the thought go having to switch to ATT makes me sick to my stomach. My family and I are jumping for joy.

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