Though antitrust experts gave AT&T's controversial bid to buy T-Mobile little chance of being approved outright by regulators, AT&T said in a statement that it was "surprised" by the Justice Department's move to block the merger.
Shortly after the Justice Department announced it would file an antitrust suit to stop the acquisition, AT&T general counsel Wayne Watts issued a press release stating the company would "vigorously contest" the lawsuit. AT&T "[remains] confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court," Watts said.
Many disagree: even before the Justice Department's suit, groups ranging from wireless-industry rivals Sprint and Leap to the consumer groups such as the National Hispanic Media Coalition spoke out against AT&T's $39 billion bid to buy T-Mobile. Senator Al Franken said the massive merger posed "threats [...] too large and too irrevocable to be prevented or alleviated by conditions."
"We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated," said Watts. "We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court." (Read the full statement here)
If the deal is not approved by U.S. regulators, AT&T stands to lose not only T-Mobile, but also $3 billion in cash and some of its access to wireless spectrum, which were promised to Deutsche Telekom in the event the acquisition was blocked. According to Wired, "Deutsche Telekom valued the total worth of the kill package at as much as $7 billion."
AT&T rival Sprint, which has opposed the merger since it was announced, praised the Justice Department's decision in its own press release.
"The DOJ today delivered a decisive victory for consumers, competition and our country. By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first," said Sonya B. McCann, Sprint's senior VP of government affairs. "Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision – one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”
The Justice Department opposed the deal on the grounds that it would "substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives."
Read the Justice Department's full statement here. See more reactions to the news below:
"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. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices." (Source)
"I have long believed that this merger would be a terrible deal for consumers, and I'm pleased the Department of Justice has taken the wise step of officially opposing it," Franken said in a statement. "I've heard from families across Minnesota that cell phone expenses are an ever-rising percentage of their bills each month, and this merger could make wireless bills increase by as much as 25 percent--a burden families certainly don't need in this tough economy. This merger would also hurt competition and concentrate enormous power in the hands of just two companies--AT&T and Verizon--who would control more than 80 percent of the wireless market. I'm glad the Justice Department recognizes that this merger would hurt consumers and I hope that the court will agree and block it from moving forward."
The Wall Street Journal's Martin Peers writes that by filing to block the merger, the Justice Department chose "law over politics." "AT&T's problem is that the legal issues aren't on its side. Antitrust lawyers had said in recent days that the company's chances of winning approval rested on political issues trumping legal concerns. The fact that the government challenged--months earlier than observers had expected--demonstrates that the legal issues won the day," writes Peers.
"Blocking this merger is a major victory for the public interest. The Justice Department clearly based its decision on the facts, and, as Free Press has argued from the start, the overwhelming evidence shows that this merger would lead to higher prices and fewer choices for consumers, and massive job cuts," said Free Press CEO Craig Aaron. "It's encouraging to see that federal regulators have not been snowed by AT&T's promises and bluster. Its smoke-and-mirrors effort was a good front for a while, but when you get down to the facts of the matter, this was a bad idea from the start, and no amount of corporate spin can overcome that reality.