It is not only opposition from T-Mobile customers that AT&T faces in its plan to merge with T-Mobile. The United States Department of Justice has filed an antitrust lawsuit on the grounds that the merger of the nation’s second-largest wireless provider with the fourth-largest would hinder competition and cause consumer prices to rise.
The Department of Justice argues that if the merger were to go through as planned, 90 percent of the U.S. wireless market would be in the hands of just three companies. Regulators are concerned about potential price increases for mobile plans, along with possible reductions in services, are likely to result from the decrease in diversity and competition in the market.
When the antitrust lawsuit was filed on August 31, AT&T insisted the $39 billion merger was in the best interest of consumers and vowed to fight on. As currently structured, the merger would create the nation’s single largest wireless provider, hurdling the combined company past Sprint and current number-one player Verizon into first place in nationwide market share.
AT&T has now announced that it will fight for its acquisition of T-Mobile on two fronts. First, the company will attempt a settlement of the antitrust lawsuit by proposing amendments to the deal. The contents of AT&T’s proposals are confidential for now, but the company could be forced to sell off up to 25 percent of T-Mobile’s business, including customers and airwaves, at both the national and regional levels. Sources say that AT&T is also expected to pledge to maintain T-Mobile’s relatively cheap service plans in order to address the Department of Justice’s concerns.
While settlement negotiations are ongoing, AT&T has requested an expedited hearing in the antitrust case, and the presiding judge has a reputation for quick action so the hearing may be scheduled within months.
AT&T has expressed confidence that a settlement that will satisfy the Department of Justice can be reached and the merger will go forward. Notably, if AT&T is unable to reach a resolution, it could be forced to pay up to $6 billion in back-out penalties to T-Mobile’s parent company, Deutsche Telekom.
Source: Reuters, “AT&T prepares two-track plan to save T-Mobile deal,” Nadia Damouni and Diane Bartz, Sept. 2, 2011