Today, the US government filed a lawsuit to block the $39 billion deal proposed by AT&T to take over T-Mobile USA, stating that the deal will pose a substantial threat to the competition in the wireless market of the country. As a result, the shares of AT&T fell down by as much as 5.5%.
The complaint was filed in the Washington based federal court today, as the Justice Department seeks a declaration from the court stating that the takeover bid of Dallas based AT&T for Deutsche Telekom owned T-Mobile is in violation of the US antitrust law.
The country’s government also asked the court to order a block on the deal’s implementation. The US stated in the filing that the elimination of an independent low-priced competitor such as T-Mobile by AT&T will take out a significant competitor from the wireless carrier market.
Randall Stephenson, the CEO of AT&T, proposed to take over the Washington based T-Mobile this March in a deal that would lead to the merger of the second and the fourth largest mobile carriers in the country, creating a new market leader surpassing Verizon Wireless. Sprint Nextel, which will be dwarfed as the number three carrier in the market if the merger takes place, has been vocally opposing the deal since it was proposed by AT&T.
AT&T stated that it was surprised by the government’s decision to block the deak. The company’s general counsel, Wayne Watts, stated that the company had been holding frequent meetings with the Department of Justice, and it hadn’t given any prior indication that such an action was being contemplated.
He added that the company has all the intentions to fight the order. A spokesperson of Deutsche Telekom, Philipp Schindera, did not comment on the filing. The telecom company said that AT&T is liable to pay it $3 billion in cash, provide T-Mobile USA a portion of its wireless spectrum and also reduce the charges for the calls made by users from T-Mobile’s network to AT&T phones, in a total package which is valued at around $7 billion if the move is rejected by regulators.
According to an analyst named Andrew Gavil, the large cancellation fee provides AT&T with more than enough incentive to fight the lawsuit. He added that the fact that the deal is being challenged by the Justice Department doesn’t mean that they will not try to negotiate a compromise at some point of time.
