Justice Department Seeks to Block AT&T, T-Mobile Merger

A proposed merger between wireless giants AT&T and T-Mobile has been put on hold after the U.S. government announced its objections today.

Citing reduced competition and possible price increases in the wireless phone market, the Justice Department today sued to block AT&T's $39 billion acquisition. Deputy Attorney General James Cole said the combination of the two wireless companies would result in "tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services."

Read more about the Justice Department action.

Cole said the government decided to bring the case because four nationwide providers account for more than 90 percent of the mobile wireless connections in America, and "preserving competition among them is crucial." For instance, Cole said, AT&T and T-Mobile currently compete head-to-head in 97 of the nation's largest 100 cellular marketing areas. They two also compete nationwide to attract business and government customers. A merger would leave just three providers with 90 percent of the wireless market.

Although T-Mobile has been lagging at number 4 in the wireless marketplace, Sharis Pozen, acting chief of Justice's antitrust division, said the company has been an important source of price competition, and innovation. She pointed to T-Mobile's roll-out of the first nationwide high-speed data network.

Pozen said at a morning news conference that AT&T had argued that increased efficiencies from the merger would result in benefits for consumers, and additional jobs, but the Justice Department rejected that argument in bringing its suit.

The merger has faced opposition from consumer groups and Sprint, the number three wireless carrier. Industry sources are on record as saying that if the merger does not go through, T-Mobile would be in a difficult financial position. It's struggling to compete with the larger carriers, and owner Deutsche Telekom AG has said it's not willing to pour more money into the carrier.

In a statement released after the Justice Departent news conference, AT&T said, "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."

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