AT&T is facing a disconnect in its $39 billion quest to acquire T-Mobile USA.
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The Obama administration is suing to block the merger of two of the four big wireless service providers in the United States.
The complaint was laid out by Deputy Attorney General James Cole.
“We are seeking to block this deal in order to maintain a vibrant and competitive marketplace that allows everyone to benefit from lower prices, better quality and innovative products.”
In the lawsuit filed Wednesday, the Justice Department said eliminating T-Mobile as a competitor would be disastrous for consumers, because “millions of wireless customers” would see higher prices. T-Mobile is typically a lower cost alternative to bigger rivals like AT&T, Verizon and Sprint.
Sharon Pozen, the acting head of the Justice Department’s Antitrust Division, says the decision was reached after an exhaustive investigation.
“We conducted dozens of interviews of customers and competitors. We reviewed millions of AT&T/T-Mobile documents. The conclusion we reached is clear any way you look at this transaction it is anticompetitive. Our action today seeks to ensure that our nation enjoys a competitive wireless industry that it deserves.”
The lawsuit is seen as a blow to AT&T, which earlier in the day pledged to bring back 5,000 U.S. jobs if the deal was approved. There’s also a potential hit to the wallet. The company faces a break-up fee worth about $6 billion, including $3 billion in cash.
But the blocking of the deal by the DOJ means SprintNextel could come a calling. The hampered No. 3 U.S. mobile service provider was hoping to snag T-Mobile before the AT&T deal was announced. Analysts say that is still likely, but the conversation may be slightly different, now that T-Mobile has been strengthened by the AT&T bid.
Bottom line: The Obama administration has moved to block AT&T’s $39 billion purchase of T-Mobile, saying the deal would be a blow to competition in the wireless services industry.