Justice Dept. wants to put off AT&T-T-Mobile merger trial

The Justice Department said it wants to withdraw or postpone its antitrust case against AT&T’s proposed acquisition of smaller rival T-Mobile USA now that the two companies no longer have a valid application to approve the deal.

The companies took back their application with the Federal Communications Commission two weeks ago after the FCC's chairman came out against the $39 billion deal. The companies have said they will seek approval from a federal judge who has scheduled a February trial on the Justice Department's case, and will file another FCC application later. Deputy Assistant Attorney General Joe Wayland told U.S. District Judge Ellen Segal Huvelle that there's "not a real transaction" until the companies file again with the FCC, and the government plans to file a motion next week to put off the case. Judge Huvelle gave the government until Dec 13 to do so and scheduled a hearing for Dec 15 on the matter. Judge Huvelle told AT&T she was concerned the company was "using" the court and wasting its time. "I have some responsibility to the taxpayers … to make sure we aren't being used in a way we weren't intended," Judge Huvelle said.

AT&T attorney Mark Hansen responded that the company did not start the court battle. The Justice Department did when it sued on Aug. 31. Hansen said it didn't make sense to have both the FCC and the court trying to rule on the merger at the same time, so the companies decided to proceed first with the trial that's already been scheduled. "If we can't convince the court of this, we won't win," Hansen said. "We understand that."

If the Dept of Justice gets its wish, the deal could wind up in limbo, forcing AT&T to either go all the way or give up. AT&T lawyers maintained they weren’t “playing some strategic game,” but Huvelle’s sympathy seemed to lie with the government. If the February trial date is postponed, then AT&T and T-Mobile parent Deutsche Telekom will start bumping into their own self-imposed deadlines. Stifel Nicolaus telecom analyst Christopher King explained in a research note: “that could put more pressure on T-Mobile (i.e., Deutsche Telekom) to reconsider its options and possibly seek to call off the merger, though it would still have to renegotiate a $4 billion break-up fee and spectrum concession with AT&T to withdraw early. The current deal runs through March 20, 2012; either party can unilaterally extend the deal three months, and a second extension is possible through September 20, 2012, though it requires a company certification to be made about the material chance of completing the deal in time.”
Separately, AT&T Chief Executive Officer Randall Stephenson said the blocking the deal will lead to higher prices for consumers.

Public Knowledge applauded the Justice Department's move. “AT&T is attempting to use the court system to force approval of the deal from the FCC and to avoid a break-up fee before the deal’s deadline next year," Harold Feld, Public Knowledge's legal director, said in a news release. "As Huvelle pointed out, any concerns about timing, however, are of AT&T’s own making." He urged AT&T to give up on the deal. “Rather than cost taxpayers and private companies millions of dollars in fees to pursue this fantasy, AT&T should abandon a transaction which will raise prices, hurt consumers and stifle innovation,” he said.