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US DOJ files suit to block AT&T, T-Mobile merger

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AT&T(s 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 (s goog) 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.

14 Responses to “US DOJ files suit to block AT&T, T-Mobile merger”

  1. This result isn’t all bad news for AT&T — they can still return 5,000 jobs to the U.S. market, they can still invest in 4G LTE infrastructure, and they can certainly work on improving the quality of their customer service.

    Finally, they can compete more effectively for T-Mobile customers, with a value-based offer, and thereby convince consumers that they are worthy.

    Perhaps AT&T’s CEO did under-estimate the anti-Bell sentiment towards his company, but they can recover — as they’ve done in the past, from their numerous setbacks.

  2. Carlos Spicyweiner

    At&T ALWAYS wanted an exorbitant deposits(At first $1,000 then $750). Verizon was second at $600. Sprint 3rd $150. T-Mobile? 10 lines, $0 deposit. When T-Mo is eaten alive by AT&T what’s gonna happen to people like me? I currently have Sprint voice plans and a T-Mobile broadband plan. People won’t be able to sign up for AT&T-Mobile with huge deposits like that. If I had $750, I would deposit it in my own bank to earn interest.

  3. Finally something good coming out of Washington, but the way things have been running so far, I’ll believe it only when it actually happens.

    I don’t think either AT&T/TMO should be in the wireless business if they cannot manage a sufficient infrastructure. Neither will be able to sell their services if they don’t invest in it. TMO is going to need more than just a pretty beaver to save them.

    As for AT&T, the money they poured into their U-verse marketing could have been better spent towards LTE – I cannot tell you how many times I had my mailbox JAMMED over the years with multi-page, colored, heavy-stock paper and cardboard all trying to sell uverse. The cost of printing and mailing those materials to millions of households around the country comes from who???

  4. quentin

    The wheels have already started turning, TMo is shedding subscribers like a leaky faucet. If it’s not AT&T, it will be another carrier that buys them. Competition is going to be reduced no matter what. Why is it better if it’s Sprint that does it?

    • Because if AT&T is really as spectrum starved as they say they are, they can only charge the highest rates in the industry for so long before customers decide that in the balance they are not getting value from their dollars; the fact that Sprint (in theory) would have more spectrum from a T-Mobile merger would mean they would gain competitiveness and be able to (in theory) offer a better value than AT&T. At some point, AT&T would have to reduce its prices to reflect the lack of spectrum/service it had.

    • Paulita Abou-Aly

      Sprint and Verizon have more compatible systems for the most part. But sometime approximately 1998,Verizon sent some of their best people to help Sprint fine tune their systems. Not sure if billing,etc. I was working for Verizon at the time and we got a big “Thank you” from Sprint for Verizon’s help. I guess I can let that cat out of the bag, since I am retired from Verizon. (Hey-hey-hey)

  5. Rosalind

    This is great news indeed! I have been one of Sprint’s first customers. There’s no service like Sprint here in the US or abroad.

    It’s good to know that our government still have the guts to stand up to these corporate giants…

  6. I think I hear angels singing somewhere. About time that the somebody in the government used some common sense.

    Oh, and saying that AT&T is alleviating anti-competitive by on-shoring CS jobs is like saying that Justin Bieber is gaining musical cred by selling albums. The two are, realistically, unrelated. The location of a job in no way impacts whether or not an industry has sufficient competition.

  7. I am shocked but extremely happy. I didn’t think Obama had the courage to stand up to the monopolists and their chorus of zombies, but if it is true, I stand corrected. Thank you for not discarding the anti-trust laws.

    Disclosure: I own shares of DT, T-Mo’s parent company, that will greatly benefit if the deal falls through.