Transfer Pricing Associates

The Justice Department Blocks the Merger Between AT&T and T-Mobile

post Monday September 12, 2011

Tags: antitrust




On 31 August, 2011, The Justice Department filed a lawsuit against the merger between AT&T and T-Mobile USA on antitrust grounds. The $39 billion merger between the U.S. second and fourth-largest wireless phone carriers, according to the Justice Department would substantially lessen competition, result in higher prices and offer fewer innovation products to customers. This block will prevent AT&T from being the largest telecommunication network provider in U.S.

The Justice Department has the authority to influence the success of merger and acquisition. F.C.C (The Federal Communication Commission) is also viewing the deal, considering how competition and public interests would be affected after transfer of the wireless network and licenses. Both F.C.C and The Justice Department have to approve the merger. “ Competition is an essential component of the F.C.C statutory public interest analysis,” said Julius Genachowski, the F.C.C chairman, in a statement. ‘Although our process is not complete, the record before this agency also raises concerns about the impact of the proposed transaction on competition.”

AT&T, who has long championed that the merger will be beneficial to the customers of both network, in response said it would fight for the lawsuit. “We plan to ask for expedited hearing so the enormous benefits of this merger can be fully reviewed,” the company said in a statement. “The D.O.J has the burden of proving alleged anti-competitive effects and we intend to vigorously contest this matter in court.”  One the other hand, Deutsche Telekom, the parent company of T-Mobile USA, said they are not going to further invest in U.S.’s wireless market and planning to put their attentions to the European market. According to the agreement between AT&T and T-Mobile, AT&T will have to pay T-Mobile about $7 million for the break-up fees and concessions.

The Justice Department argues that the merge will bring the number of national wireless phone providers from four to three which would harm the competition, since the four service providers currently accounts for 90% of the mobile wireless connections nationwide. “As AT&T acknowledged less than three years ago during a merger proceeding, it aims to ‘develop its rate plans, features and prices in response to competitive conditions and offerings at the national levels- primarily the plans offered by the other national carriers,’” the Justice department said in its lawsuit. “As AT&T recognized, ‘the predominant forces driving competition among wireless carriers operate at the national level.’ That remains the case today.”

After hearing the blocking effort of the Justice Department, some T-Mobile customers said they were happy about the blocking. "I'm so happy that I don't have to be an AT&T customer." Posted to a T-Mobile message board.

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