Apart from Justice, government regulators reviewing the deal expressed skepticism that it would be good for consumers.
T-Mobile competes directly with AT&T in 97 of 100 local wireless markets, and combined, they serve 132 million customers. The two firms are the only national carriers using a technology known as GSM, which allows phones on the system to be used overseas.
Graphic: The history of wireless mergers, dating back to 2002.
Justice Department officials say they've filed suit to block AT&T's $39 billion deal to buy T-Mobile USA. (Aug. 31)
“Competition is an essential component of the FCC’s statutory public interest analysis . . . and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition,” Julius Genachowski, chairman of the Federal Communications Commission, said Wednesday, in his strongest criticism of the deal to date.
The FCC has not made a decision. But an FCC official, commenting on the condition of anonymity because the review is ongoing, said: “We will not undermine the DOJ’s process. You read the tea leaves from that.”
The courts have not always been kind to Justice when it brings antitrust cases.
The AT&T merger will go before U.S. District Judge Ellen Huvelle, who in 2001 ruled against the department’s effort to block SunGard Data Systems’ acquisition of Comdisco. In a better-known case, U.S. District Judge Vaughn R. Walker in 2004 turned down Justice’s request to block Oracle’s $10 billion acquisition of PeopleSoft.
In most cases, Justice tries to get companies to walk away from mergers by threatening legal action rather than going to court. Under Obama, the department has mostly greenlighted big mergers, even the most controversial ones, although it has attached conditions to the deals.
Some analysts said it is still possible for AT&T and Justice to arrive at a settlement.
“In light of the government’s mixed record in merger litigation, the political sensitivities associated with the deal in advance of the 2012 presidential-election year . . . negotiation . . . may yet result in a settlement down the road,” said Jeff Silva, an analyst at Global Medley Advisors.
But for now, Justice officials do not see a remedy that would solve the problem of having more than 80 percent of all U.S. wireless customers in the hands of two players, AT&T and Verizon Wireless, according to a source familiar with Justice’s thinking.
Pozen, the acting assistant attorney general, said the agency will work with AT&T to resolve antitrust concerns.
“Our door is open,” she said, signaling the possibility that the deal could succeed through a settlement out of court. “We’ll see what happens next,” she said.
Consumer groups applauded Justice’s action.
T-Mobile is viewed as a low-cost alternative to AT&T and Verizon Wireless. Consumers Union, the publisher of Consumer Reports, found that T-Mobile’s data plan is on average 50 percent cheaper than AT&T’s.
Other consumer advocacy groups said AT&T has eliminated unlimited data plans for customers and raised prices on some service plans even as consumers increasingly rely on their phones to make calls and gain access to the Internet. One in four American households has abandoned traditional telephone lines and relies solely on mobile devices.
“We are delighted that law has trumped politics and that the DOJ looked at facts and decided the merger is bad for competition and consumers,” said Gigi Sohn, president of the public interest group Public Knowledge.
Staff writers Jia Lynn Yang and Hayley Tsukayama contributed to this report.
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