AT&T is now facing a huge potential roadblock on its proposed merger with T-Mobile: Bloomberg reports the U.S. Department of Justice has filed an anti-trust suit to block the deal. Claiming the merger would “remove a significant competitive force from the market,” the filing suggests the deal would create an anti-competitive environment if allowed to proceed. AT&T has recently taken steps to alleviate such sentiment, saying Tuesday it returned 5,000 onshore customer service jobs from offshore locations as a result of the merger.
T-Mobile stands to gain quite a bit if the deal doesn’t go through. Deutsche Telekom, the parent company of T-Mobile USA, will earn a $3 billion payoff, while T-Mobile USA will receive a small portion of AT&T’s existing wireless spectrum and reduced roaming rates on AT&T’s network.
It will take time before we see the outcome of the just-filed suit, but I can’t help but think back to Om’s thoughts when the proposed merger was announced; they echo the thoughts of the DOJ:
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.
Handset makers, competitors and Google all have much to lose by the deal as well, but if the $39 billion merger doesn’t go through, it looks like the biggest loser will be AT&T. The carrier will lose cash, spectrum holdings and the ability to add T-Mobile’s unique 1700 MHz frequency to AT&T’s LTE network expansion plans.