Justice Department Files Antitrust Lawsuit to Block AT&T’s Acquisition of T-Mobile (updated and video)
Originally published: August 31, 2011
Last updated: September 1, 2011 - 7:57am
The Department of Justice filed a civil antitrust lawsuit to block AT&T’s proposed acquisition of T-Mobile USA. The department said that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.
The department’s lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG. According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation’s largest 100 cellular marketing areas. They also compete nationwide to attract business and government customers. AT&T’s acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace.
The complaint cites a T-Mobile document in which T-Mobile explains that it has been responsible for a number of significant “firsts” in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi “hotspot” access, and a variety of unlimited service plans. T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology. The complaint states that by January 2011, an AT&T employee was observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims."
The complaint details other ways that AT&T felt competitive pressure from T-Mobile. The complaint quotes T-Mobile documents describing the company’s important role in the market:
- T-Mobile sees itself as “the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market”; and
- T-Mobile’s strategy is to “attack incumbents and find innovative ways to overcome scale disadvantages. [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small. Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . .”
The complaint also states that regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers. And, the department said that any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction’s anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.
The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction. The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers. Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.Additional coverage: US Moves to Block Merger Between AT&T and T-Mobile (NYTimes) http://www.nytimes.com/2011/09/01/technology/us-moves-to-block-merger-be... In T-Mobile Suit, Consumers Are Central (NYTimes) http://www.nytimes.com/2011/09/01/technology/can-t-mobile-carry-on-as-st... After Grand Promises, U.S. Steps Up Antitrust Efforts (NYTimes) http://dealbook.nytimes.com/2011/08/31/the-justice-department-versus-dea... U.S. Sues to Stop AT&T Deal (WSJ) http://online.wsj.com/article/SB1000142405311190471660457654237383106938... Loss of Pay, Slip in Rankings Are at Stake for Bankers (WSJ) http://online.wsj.com/article/SB1000142405311190389590457654291164563307... AT&T and T-Mobile merger in jeopardy as Justice Department takes action (CSM) http://www.csmonitor.com/Innovation/Horizons/2011/0831/AT-T-and-T-Mobile... AT&T/T-Mobile USA deal under threat (FT) http://www.ft.com/cms/s/0/4d8e7bc2-d3e4-11e0-b7eb-00144feab49a.html Logic of AT&T’s $39bn bid under scrutiny (FT) http://www.ft.com/cms/s/0/533d9f48-d3f4-11e0-b7eb-00144feab49a.html
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