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Posted at 04:45 PM ET, 12/09/2011

AT&T, T-Mobile deal dealt blow again after DOJ moves to scrap chance at court victory

Updated at 4:45 p.m.

NEW YORK, NY - FILE: Executives at AT&T attend a news conference where it was announced that AT&T Inc. will be buying its wireless rival T-Mobile USA from Deutsche Telekom AG for $39 billion in cash and stock on March 21, 2011 in New York City. (Spencer Platt - GETTY IMAGES)

AT&T had a plan to salvage its proposed $39 billion merger with T-Mobile: Win in court against the Justice Department and then convince other skeptical regulators.

But that strategy was thrown into disarray Friday when a federal judge said she would weigh a Justice Department request to throw out the antitrust case altogether, which could rob the wireless giant of a chance to prove itself in court.

A decision to dismiss or even delay the case could all but seal the fate of the merger as originally conceived, analysts said. During the hearing, U.S. District Court judge Ellen Huvelle expressed little sympathy for AT&T and T-Mobile.

She said it was “presumptuous” for the wireless giants to think they could “use” an antitrust trial to influence the thinking of Federal Communications Commission regulators, who oppose the deal.

“We don’t have any confidence that we are spending all this time and effort and taxpayers’ money and that we’re not being spun,” Huvelle said.

After the hearing was over, an AT&T attorney reiterated the company’s determination to fight for the merger.

"We are anxious to bring to the American consumer the benefits of increased wireless network capacity and efficiencies that can only arise from combining the resources of AT&T and T-Mobile USA,” said Wayne Watts, general counsel at AT&T. “We are eager to present our case in court."

Last month, AT&T withdrew its application with the FCC after the agency chief Julius Genachowski said he would seek to block the deal. The company said it would first focus on its court battle with Justice and then reapply for FCC approval.

But Friday’s developments exposed flaws in that plan.

For one, Justice attorneys asked the judge to dismiss its own lawsuit, in essence, forcing the company to deal first with the FCC, which has broader authority to block the deal.

“Since there is no proceeding at the FCC, there is no case,” Justice attorney Joseph Wayland argued, adding that his department would file their motion to withdraw or stay the case on Tuesday. The judge said she would decide on the motion on Thursday.

In addition, AT&T’s strategy did not go over well with Huvelle.

“At this moment, [the DOJ] does not think you are a serious opponent without an application at the FCC,” she said. “Don’t you understand that this ‘strategy’ has a slight aura of using the court?”

The judge also questioned whether she should accomodate AT&T’s request to speed up the trial process. If the merger is not completed by September of next year , AT&T will have to hand over $4 billion worth of cash and other assets to Deutsche Telekom, T-Mobile’s parent.

“The landscape has changed. I have no new assurances that you will proceed with the FCC in a timely manner,” Huvelle said.

The Justice Department last August sued to block the merger saying it would lead to higher monthly cell phone bills and less competition in the wireless market. The FCC expressed similar opposition late last month, creating a two-front fight for AT&T.

But instead of reconciling with the FCC, AT&T fired off a harsh response to the agency’s concerns, escalating tensions with the agency that now holds the key to the merger.


How AT&T’s powerful lobbyists lost its $39 billion bid for T-Mobile

Verizon strikes spectrum, cable deal for airwaves and marketing

By  |  04:45 PM ET, 12/09/2011

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