Is AT&T-Mo now DOA?

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The attorneys general of seven states today joined the Justice Department’s suit to block AT&T’s proposed buy of T-Mobile, citing worries about competition. California, Illinois, Massachusetts, New York, Ohio, Pennsylvania and Washington joined the DoJ suit, apparently agreeing that the deal stymies competition.

Together, these state represent a third of the American population. The addition of the attorneys general to the lawsuit comes one day after members of Congress wrote to President Obama, asking him to approve the deal. AT&T sent the following statement:

It is not unusual for state attorneys general to participate in DoJ merger review proceedings or court filings. At the same time, we appreciate that 11 state attorneys general and hundreds of other local, state and federal officials are publicly supportive of our merger. We will continue to seek an expedited hearing on the DOJ’s complaint. On a parallel path, we have been and remain interested in a solution that addresses the DOJ’s issues with the T-Mobile merger.

We remain confident that we’ll reach a successful conclusion and look forward to delivering the merger benefits of additional wireless network capacity to improve customer service, expanded LTE deployment to 55 million more Americans, $8 billion in additional investment, and a commitment to bring 5,000 wireless call center jobs back to the United States.

AT&T responded last week to the DoJ lawsuit, arguing that the DoJ is wrong, and has vowed to fight for its right to buy T-Mobile. As of now, the attorneys general piling on is one of several continuing blows to the nation’s No. 2 carrier as it seeks to swallow its smaller rival. Even stalwart AT&T supporters, such as industry analyst Craig Moffet, are questioning whether or not Ma Bell can prevail against the DoJ. On the other hand, a Standard and Poor’s analyst seems to think it’s still going to happen.

If the deal falls through, all eyes will turn toward T-Mobile’s future as an independent company, or as a buyout target for Sprint or a private equity firm.

Chetan Sharma, an industry analyst told me last week that consolidation is inevitable in the telecommunications sector, and the DoJ lawsuit means that neither AT&T nor Verizon could go shopping for a big deal (although maybe they can pick up smaller assets). So, while consumers may rejoice, it’s still not clear that T-Mobile, or U.S. mobile broadband competition is out of the woods yet.

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