Department of Justice files to block AT&T / T-Mobile merger

Bloomberg is reporting that the department of justice has filed to block the merger of AT&T and T-Mobile. The report discusses the agency’s concern that the merger would remove a low-priced competitor from the market. The report then goes on to say that the DOJ seriously considered AT&T’s claim that T-Mobile’s spectrum would help it build out broader LTE coverage more quickly and ultimately decided that the potential impact on competition wasn’t worth it. They then went on to dismiss the claim that the merger is the only way for AT&T to enhance their network, saying “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.”

If this wasn’t enough bad news for AT&T/T-Mobile proponents, the chairman of the FCC, Julius Genachowski, has responded to the report with an official statement saying that the FCC has “serious concerns” about the merger affecting wireless competition.

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.

To add icing to the cake, Sprint has also responded to the DOJ report by saying it’s a “decisive victory for consumers.” This, of course, is also a victory for Sprint as they’ve been campaigning against the merger almost nonstop since it was first announced.

Keep in mind that this doesn’t mean the merger has been stopped completely. It just means that AT&T will have more work to do. AT&T issued a statement, saying “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.” They went on to say “We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.”

It is very important for AT&T that they get this resolved because they will be forced to pay T-Mobile a whopping $6 billion in cash and spectrum if the merger fails to go through.