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AT&T loses bid to buy T-Mobile USA

31 August 2011

Sprint wins as US government decides to block AT&T bid to buy Deutsche Telekom’s T-Mobile USA

Read more: AT&T Deutsche Telekom T-Mobile Sprint Verizon Wireless

The US Justice Department has killed off AT&T’s $39 billion bid to buy T-Mobile USA from Deutsche Telekom, saying that the deal would reduce competition and lead to higher consumer prices.
The department has effectively blocked the merger by filing a complaint in a US district court, saying that removing T-Mobile would take away a company that “places important competitive pressure on its three larger rivals” — AT&T, Verizon Wireless and Sprint.
Industry commentator Jeff Kagan said: “This is a big blow to AT&T, but if it happened it would have been a big blow to the entire industry.”
Kagan said that the deal is likely to be renegotiated. “This deal is not dead, but it will be different. The question is what will AT&T have to give up.”
Wayne Watts, AT&T’s senior executive vice president and general counsel, 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.”
Shares of both AT&T in New York and Deutsche Telekom in Frankfurt fell in response to the news. Shares of Sprint, which has done most to oppose the deal, went up.
Sprint executive Vonya McCann, senior vice president of government affairs, said: “By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision — one which will ensure that consumers continue to reap the benefits of a competitive US wireless industry.
Kagan said: “This is a big win for Sprint and Dan Hesse since they have been opposed. AT&T needs more capacity. However this is the same problem every carrier has to deal with going forward. We need solutions. One could be to take back the spectrum and let all carriers use it equally. Another could be from a solution like LightSquared wants to offer.”
US deputy attorney general James Cole said in a press conference in Washington DC: “Four nationwide providers account for more than 90% of the mobile wireless connections in America, and preserving competition among them is crucial. For instance, AT&T and T-Mobile currently compete head-to-head in 97 of the nation’s largest 100 cellular marketing areas. They also compete nationwide to attract business and government customers. Were the merger to proceed, there would only be three providers with 90% of the market, and competition among the remaining competitors on all dimensions — including price, quality, and innovation — would be diminished.”
He said that the department’s complaint to the court points to AT&T feeling competitive pressure from T-Mobile. He said that an AT&T employee told the deparment that T-Mobile “was first to have HSPA+ devices in their portfolio” and AT&T “added them in reaction to potential loss of speed claims”.
Cole said: “A merged AT&T and T-Mobile would combine two of the four largest competitors in the marketplace, and would eliminate T-Mobile, an aggressive competitor, from the market.”
At AT&T, Watts said: “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.”
McCann at Sprint said: “Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”  GTB






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