Justice Department files antitrust lawsuit to block AT&T’s acquisition of T-Mobile

September 2, 2011 | By | Reply More

Making the news this week, the US DOJ announced that they have filed a lawsuit to prevent the T-Mobile acquisition by AT&T. In the papers produced by the Department of Justice, the Deputy Attorney General claims antitrust reasons for stopping the proceedings. They are basically saying that if the deal were to go through, this would harm consumers. The deal would hamper competition and diminish value, quality and innovation in the industry.

Deputy James M. Cole argued that with only 4 national carriers, dropping that number to 3 would be bad not only for people, but for the industry as a whole. He cites various cases where T-Mobile’s presence has been good for competition, such as putting competitive pressure on AT&T, and introducing the first LTE phones. Finally, they cite possible outcomes of the deal which could lead to service limitations and roaming restrictions.

This of course doesn’t end the acquisition completely. AT&T said they will fight, and a court will have to decide on the merits of both parties. This will however last a long time, much longer than what the current deal would have entailed, so AT&T may end up losing big. If the deal collapses completely, they will need to pay a breakup fee of $6 billion. On T-Mobile’s side, apparently they were not expecting this at all and have no contingency plan. They will need to come up with something fast.

As for what this means for the companies in the long term, that’s hard to say. Some analysts have predicted that if this had gone through, then Sprint, the last and smallest national carrier in the US, would have been prime for the taking. We could well have ended up with someone like Verizon grabbing them, dropping the amount of cellphone carriers to just 2. Now, there’s very little risk of that, especially after the DOJ suit.

In fact, it’s surprising mainly because the DOJ rarely files antitrust lawsuits. The vast majority of deals go through the approval process with no issue. The last big publicized antitrust case was Microsoft, when the government went after them for years on antitrust grounds. In the wireless industry however, that’s a first since AT&T was the old AT&T, back in the early 1980s.

As for you and me, this will not change much, at least not yet. The corporations will debate this, and spend a lot of money on lawyers, while life continues for the users. In several years, we may see the first signs of things changing. If the DOJ is right, and having more carriers is needed for competition, then we may see our bills go down, or our services improve. But that won’t happen overnight. Until then, we can watch from the side lines as the big players dance.

Category: News

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