AT&T/T-Mobile Acquisition Hits Snag With Department Of Justice
August 31, 2011
The merger of AT&T and T-Mobile ran into a snag today when the U.S. Department of Justice (DOJ) claimed it would violate U.S. antitrust laws. The DOJ believes it will harm the competitiveness of the wireless industry.
The $39 billion acquisition was on track to be finalized in early 2012 so this decision came as a shock to AT&T. They said they were “surprised and disappointed” by the filing.
Sprint Nextel Corp. has lobbied against this merger for months, stating it will harm consumers through higher prices and lower device options. Sprint asked the government to block the deal back in March, and filed a formal petition with the FCC in May.
Some analysts believed the merger was doomed from the start. To try and minimize the risk of the deal falling apart, AT&T promoted the merger as one that would benefit consumers by spreading 4G (LTE) across the country faster than if the two companies remained separate.
This ruling is not permanent, as it can be renegotiated and resubmitted for approval. Jeff Kagan, an independent telecom analyst believes the government is saying the deal will not be approved the way it is currently structured.
So this means AT&T will need to make some concessions, and they have indicated in the past that they would be willing to do so to make this merger happen.
The Communications Workers of America (CWA) is speaking out against the decision of the DOJ, stating this deal was going to create good jobs and bring better Internet technology to rural areas. The CWA cited the AT&T announcement which claims they will bring 5,000 jobs, which were once outsourced, back into the U.S.
If the deal does fall apart, AT&T may have to pay $3 billion in breakup fees to T-Mobile.