The U.S. government sued to block AT&T Inc. (T)’s proposed $39 billion acquisition of T-Mobile USA Inc., saying the deal would “substantially lessen competition” in the wireless market. AT&T shares fell as much as 5 percent.
In the complaint filed today in federal court in Washington, the U.S. is seeking a declaration that Dallas-based AT&T’s takeover of T-Mobile, a unit of Deutsche Telekom AG (DTE), would violate U.S. antitrust law. The U.S. also asked for a court order blocking any arrangement implementing the deal.
“AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market,” the U.S. said in its filing.
Should regulators reject the deal, which would create the biggest U.S. wireless carrier, AT&T would have to pay Deutsche Telekom $3 billion in cash. It would also provide T-Mobile USA with wireless spectrum in some regions and reduced charges for calls into AT&T’s network, for a total package valued at as much as $7 billion, Deutsche Telekom said this month.
Philipp Schindera, a spokesman at Bonn-based Deutsche Telekom, declined to immediately comment on the filing. Jessica Smith, a Justice Department spokeswoman, declined to comment on the suit. Michael Balmoris, an AT&T spokesman, didn’t immediately respond to an e-mail and phone calls seeking comment.
Shares Drop
AT&T fell $1.02, or 3.4 percent, to $28.60 at 10:55 a.m. in New York Stock Exchange composite trading after declining as much as $1.49. Deutsche Telekom American depositary receipts dropped as much as 6.4 percent, to $12.93.
The purchase of Bellevue, Washington-based T-Mobile would combine the second- and fourth-largest carriers to create a new market leader ahead of No. 1 Verizon Wireless. The new company would have dwarfed current No. 3 carrier Sprint Nextel Corp., which argued against the deal. Overland Park, Kansas-based Sprint’s shares jumped as much as 9.9 percent.
Some U.S. lawmakers have said the deal may reduce competition and raise consumer costs. The Federal Communications Commission has given itself more time to study new data presented by AT&T.
Economic Models
AT&T in a July 25 filing at the FCC submitted new economic models that it said showed the merger would lower prices and increase service in large metropolitan markets. The models offer “further detailed support” for arguments that the merger will lessen strains on the company’s wireless network, lower costs and increase quality, AT&T said in the filing.
“Given the size of the cancellation fee that was negotiated into his agreement, AT&T has the incentive to fight,” said Andrew Gavil, a law professor at Howard University in Washington. “The fact that the Justice Department is challenging the deal doesn’t mean they won’t negotiate a resolution at some point.”
The case is U.S. v. AT&T Inc., 11-01560, U.S. District Court for the District of Columbia (Washington).
To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net

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,” the department said in the statement. “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.”

AT&T Inc. (NYSE: T) today committed that after closing its proposed merger with T-Mobile USA, it will bring back 5,000 wireless call center jobs to the United States that today are outsourced to other countries.

Today’s commitment results from AT&T developing detailed analysis focused specifically on identifying opportunities with the T-Mobile merger to bring good-paying wireless call center jobs back to the United States.

In addition to bringing jobs back, AT&T committed that the merger will not result in any job losses for U.S.-based wireless call center employees of T-Mobile USA or AT&T, who are on the payroll when the merger closes.

The 5,000 new wireless call center jobs at AT&T will offer among the nation’s most highly competitive wages and benefits. AT&T, which has not yet determined where in the U.S. the new jobs will be located, is the nation’s largest employer of full-time union employees and the only unionized major U.S. wireless carrier.

“At a time when many Americans are struggling and our economy faces significant challenges, we’re pleased that the T-Mobile merger allows us to bring 5,000 jobs back to the United States and significantly increase our investment here,” said Randall Stephenson, AT&T Chairman and CEO. “This merger and today’s commitment are good for our employees, our customers and our country.”

Today’s announcement represents the largest commitment by an individual American company to bring jobs back to the U.S. since the economic crisis began in 2008.

Also, AT&T has committed as part of the T-Mobile merger to increase its U.S. infrastructure investment by more than $8 billion. According to an analysis by the Economic Policy Institute that was commissioned by the Communications Workers of America, AT&T’s increased investment is estimated to produce up to approximately 96,000 new U.S. jobs.

AT&T said today’s jobs commitment does not change its previous guidance on the expected overall merger synergies.

Beyond the jobs created, AT&T’s acquisition of T-Mobile USA provides a fast, efficient and certain solution to the impending exhaustion of wireless spectrum in many markets, which limits both companies’ ability to meet the ongoing explosive customer demand for mobile broadband. The uniquely complementary nature of AT&T and T-Mobile’s network assets will allow the combined company to add wireless network capacity – the functional equivalent of new spectrum – sooner than any other alternative.

This additional wireless network capacity will enable AT&T to offer better service — fewer dropped and blocked calls, and faster data speeds. Plus, the economic scale, additional spectrum and other benefits resulting from the merger will enable AT&T to deliver high-speed 4G LTE mobile broadband service to 97 percent of the U.S. population, or 55 million more Americans than it would without the merger. Reaching 97 percent of the population with LTE will create a much more extensive and robust mobile broadband platform that will fuel growth and investment throughout the country.

The benefits of the AT&T and T-Mobile merger have been recognized by numerous elected officials throughout the country, including 27 governors, more than 100 mayors, 11 state attorneys general, 79 Democratic Members of the U.S. House of Representatives and more than 150 chambers of commerce from 40 states, as well as a dozen labor unions and dozens of high-tech companies, such as Facebook, Microsoft, Yahoo! and Oracle

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. In addition to these factors, there are risks and uncertainties associated with the T-Mobile business, the pendency of the T-Mobile acquisition and the ability to realize the benefits of the integration of the T-Mobile business. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise.

I'm rooting against the merger, as I'm quite satisfied with TMO as my carrier.

Also, I find it amusing that AT&T's arguing that it will increase the quality of their service. Well, duh, you're buying T-Mobile to get their bandwith. But what will it do to T-Mobile customers? And, if the AT&T customers are dissatisfied with the quality available to them through your own offerings, they're free to switch TO T-Mobile. That's the "reduce competition" part...

I'll give it to T-mobile, though, their $49.99 unlimited plan is the ****.

AT&T has a plan to save the $39 billion T-Mobile acquisition blocked by the U.S. government, reports Reuters quoting sources familiar with the matter.

AT&T's new plan has two parts: First, it will pledge to keep T-Mobile's subscription plans and rates at current levels. Second, it will need to sell off up to 25% of T-Mobile's business, potentially including airwaves and customers.

Some analysts doubt AT&T can pull off the merger. Former antitrust enforcer Bob Doyle toldReuters it would be difficult to find a buyer for parts of T-Mobile's business in the U.S., as a sale to either Verizon or Sprint would also cause antitrust lawsuits.

Should AT&T fail to reach a settlement, it will need to pay T-Mobile's owner Deutsche Telekom approximately $6 billion.

In a recent Mashable poll, 66.49% of readers said the U.S. government was right to block the AT&T/T-Mobile merger, 25.53% thought the government should butt out and 7.97% were unsure.

AT&T's new plan has two parts: First, it will pledge to keep T-Mobile's subscription plans and rates at current levels. Second, it will need to sell off up to 25% of T-Mobile's business, potentially including airwaves and customers.