A proposed merger between communications giant AT&T and rival company T-Mobile is being challenged by antitrust regulators. The U.S. Department of Justice has filed a lawsuit attempting to block the $39 billion dollar merger between the two companies.
The joining of the two companies would create the largest wireless company in the country, combining T-Mobile’s 34 million customers with the 98 million subscribers at AT&T.
AT&T is just behind Verizon and is the second largest U.S. wireless company in numbers of customers while T-Mobile ranks fourth. Department of Justice officials are concerned the merger would concentrate 78 percent of industry profits and most of the wireless market in just two companies.
A spokesperson for the Department of Justice said that their point of view is that the merger would result in millions of customers paying higher prices while enjoying fewer choices and lower quality products in wireless services.
The Federal Communications Commission oversees the wireless industry and would also have to approve the planned merger. The chairman of the FCC indicated there were concerns about the impact on competition if the merger were allowed to go through.
The general counsel for AT&T said the company was disappointed by the Department of Justice action, but believes the merger is in the best interest of consumers. AT&T has said the merger is needed in order to expand its 4G wireless network and compete with rival Verizon. Without the merger, AT&T says it cannot cover 97 percent of the U.S. with 4G service.
In response, the Department of Justice insisted that AT&T has not demonstrated that the merger’s benefits outweigh the potential effects on competition and rates.
Smaller carriers like Sprint have also opposed the merger saying that limited competition in the market would lead to high prices paid by consumers.
The lawsuit doesn’t mean that the merger won’t happen, but, rather, that AT&T has more work to do to convince antitrust regulators that it will be good for consumers, rather than bad for competition.
Source: WSBTV, “DOJ Moves to Block AT&T Merger With T-Mobile,” David Goldman, Aug. 31, 2011