AT&T/T-Mobile Merger Blocked by DOJ

PBS Nightly Business Report
August 31, 2011

The giant merger between AT&T (NYSE: T) and T-Mobile got disconnected today. Susie, the Justice Department filed a lawsuit to block this $39 billion deal.

But in the end, the government called the deal bad for consumers, saying “price, quality and innovation would be diminished if the merger between the number two and number four wireless carriers took place.”

Now today’s lawsuit by the Department of Justice is the biggest challenge yet to this merger, which has faced earlier criticism. The FCC, for one, echoed concerns about competition. AT&T (NYSE: T) stock did fall on the news, down almost 4 percent today. The bulls, though, came calling for Sprint, the competitor here, sending its stock up nearly 6 percent.

AT&T (NYSE: T) tied up its merger with T-Mobile with a pretty political bow. There were promises to build out wireless broadband in rural America, an Obama administration priority. Labor unions were part of the team, 5,000 call center jobs would be brought back to the United States.

But today, Justice Department anti-trust lawyers bucked the political pressure and decided four mobile phone companies was as low as they would go.

There’s a quip from a famous old anti-trust lawyer that used to say the difference between Republicans and Democrats after all the fancy econometrics is Democrats want to see four competitors and Republicans are satisfied with three. I don’t know if that’s true, but that’s where we’ve gotten with this case, is a determination that we need to at least now have four national players with this level of competition.

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