Federal Government Says No to AT&T Acquisition of T-Mobile

The U.S. government has filed a lawsuit to prevent AT&T from buying T-Mobile. The reason given is that having the second largest U.S. carrier buy the fourth largest would "substantially lessen competition".

FCC Chairman Julius Genachowski released the following statement:  

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.

AT&T's Response
This deal, if it goes through, would make AT&T the largest carrier in the United States in number of subscribers. And if it doesn't go through, the company has to pay T-Mobile $3 billion, so clearly it has tremendous incentive to overcome the protests of the U.S. government.

A statement released by the carrier says:

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 DOJ 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 DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.

AT&T argues that the merging of its cellular-wireless network with T-Mobile's would improve the wireless service for customers of both companies. AT&T subscribers would get more bandwidth -- in many places AT&T's network is saturated with users while T-Mobile's is not. T-Mobile customers would get service in new areas.

Critics of the deal have pointed out that T-Mobile has consistently offered less expensive wireless service plans than its larger rival. And it's also been a bit more innovative, offering the first Android smartphone and the country's first HSPA+ network, for example.