Originally published: August 31, 2011
Last updated: August 31, 2011 - 7:29pm
After the Department of Justice filed a civil antitrust lawsuit to block AT&T’s proposed acquisition of T-Mobile USA, reaction pored in.
AT&T 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 D.O.J. 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 D.O.J. has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.” AT&T shares dropped 3 percent after the announcement.
T-Mobile parent company Deutsche Telekom said that it is prepared to do battle to keep alive its deal to sell its U.S. arm to AT&T. “Deutsche Telekom is very disappointed by the DOJ’s action, and will join AT&T in defending the contemplated merger against the complaint in court,” DT Executive Vice President Philipp Schindera said. “(The) DOJ failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction, which would lead to significant customer, shareholder, and public benefits.”
Sprint-Nextel stock rose 5.9 percent after the DoJ's announcement. Vonya B. McCann, senior vice president of Government Affairs for Sprint, said: “The DOJ today delivered a decisive victory for consumers, competition and our country. By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision – one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”
"It's surprising," said Steve Clement, an analyst at Pacific Crest. "Clearly AT&T didn't expect this. AT&T put itself in a position where it would have to pay a hefty break-up fee to T-Mobile USA."
“Given the size of the cancellation fee that was negotiated into his agreement, AT&T has the incentive to fight,” said Andrew Gavil, a law professor at Howard University in Washington. “The fact that the Justice Department is challenging the deal doesn't mean they won’t negotiate a resolution at some point."
Craig Moffett, senior analyst with Bernstein Research, says that the double hit of DOJ's suit against the AT&T–T-Mobile merger and the FCC's signal that it too has issues with the deal's impact on competition, means the proposed $39 billion combo of two of the top four wireless carriers is "all but definitively dead."
Federal Communications Commission Chairman Julius Genachowski: "By filing suit today, the Department of Justice has concluded that AT&T's acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws. Competition is an essential component of the FCC's statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices."
FCC Commissioner Michael Copps: "Today's announcement shows a Department of Justice taking its pro-competitive responsibilities seriously. I share the concerns about competition and have numerous other concerns about the public interest effects of the proposed transaction, including consumer choice and innovation."
“While the Department of Justice’s complaint indicates that the parties did not convince the Antitrust Division of the merits of the proposed merger," said FCC Commissioner Mignon Clyburn, "the FCC has not concluded its review of this merger application. The information and data requests, which the FCC staff has sent to the applicants and other parties, demonstrate that the FCC is also carefully considering the competitive issues raised by the application to ensure that the public interest is served.”
Sen. Herb Kohl (D-WI), the chairman of the Senate Judiciary Committee's antitrust subpanel: “We applaud the Justice Department for their action to protect consumers in a powerful and growing industry that reaches virtually every American. Preserving choices means ensuring competition, and competition ultimately benefits consumers."
“I have long believed that this merger would be a terrible deal for consumers," said Sen Al Franken (D-MN), "and I’m pleased the Department of Justice has taken the wise step of officially opposing it. his merger would also hurt competition and concentrate enormous power in the hands of just two companies — AT&T and Verizon — who would control more than 80 percent of the wireless market."
Sen. John Cornyn (R-TX) said he was “disappointed in the Justice Department's decision,” citing the announcement from AT&T that it intended to return 5,000 outsourced call center jobs to the United States if the deal went through.
"The Justice Department's decision to take action to block AT&T's purchase of T-Mobile is a victory for competition, consumers and choice. We should be protecting American consumers holding their cell phones, not just telecommunications titans holding stock in the companies," said Rep Ed Markey (D-MA). "The merger would reduce the number of national wireless companies from four down to three, sending the mobile marketplace into a telecommunications time machine back to 1993. That would be an historic mistake."
Rep. Pete Sessions (R-TX) called DOJ’s decision “the latest example of the Obama administration’s continued assault on the American economy.”
Public Knowledge Legal Director Harold Feld: “Fighting this job-killing merger is the best Labor Day present anyone can give the American people. AT&T’s effort to recreate ‘Ma Cell’ by holding rural broadband hostage and threatening American jobs deserves nothing but scorn. The FCC should move as quickly as possible to follow the lead of the Department of Justice and reject the merger."
“This ought not to be a big surprise," said Media Access Project Senior Vice President and Policy Director Andrew Schwartzman. "This is arguably the most anti-competitive move in recent American economic history. It is heartening that the Department of Justice has withstood withering political pressure from AT&T to do the right thing for the American public."
Free Press President and CEO Craig Aaron: "Blocking this merger is a major victory for the public interest. The Justice Department clearly based its decision on the facts, and, as Free Press has argued from the start, the overwhelming evidence shows that this merger would lead to higher prices, fewer choices for consumers, and massive job cuts. It's encouraging to see the federal regulators have not been snowed by AT&T's promises and bluster. Its smoke-and-mirrors effort was a good front for a while, but when you get down to the facts of the matter, this was a bad idea from the start, and no amount of corporate spin can overcome that reality. AT&T has already invested untold millions in lobbying and campaign contributions, and it is going to play every card in the deck to try to get this merger done. Free Press and our network of 500,000 activists will continue to oppose it. But we hope instead that AT&T will drop this disastrous deal and invest in expanding its network and improving its woeful customer service."
Parul Desai, policy counsel for Consumers Union, said, “This announcement is something for consumers to celebrate. We have consistently warned that eliminating T-Mobile as a low-cost option will raise prices, lower choices, and turn the cellular market into a duopoly controlled by AT&T and Verizon. The lawsuit filed by DOJ today proves that it has serious concerns and believes the best way to protect millions of consumers nationwide is by blocking the merger. We will continue to work with policy makers to ensure competition remains strong and in the best interest of consumers.”
Drew Clark of BroadbandBreakfast.com writes that the attention should now turn to what some consider the deal’s key driver: getting more wireless spectrum into the hands of broadband providers. The thirst for spectrum is the key reason why the frequencies currently in the possession of the major wireless providers — AT&T, Verizon, Sprint and T-Mobile — are the most intensively used on the radio dial. And what spectrum is the least intensively used? The spectrum used by television broadcasters. After all, more than 90 percent of television viewing now takes place over cable, satellite, or internet viewing.
Conservative think tank MediaFreedom said that if the DOJ suit “bears fruit, it will have killed a ‘jobs stimulus plan’ that needed no approval from an ornery Congress – a sad outcome made even more so by the tough road we face in getting our economy back on its feet.”
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