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US acts to scuttle mobile phone takeover
Source: Agencies |
September 2, 2011, Friday
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Print Edition
Print Edition
THE US government has taken court action to block AT&T's US$39 billion purchase of T-Mobile USA, claiming it will harm competition in the wireless market and lead to higher prices.
The surprise move on Wednesday, the biggest antitrust challenge yet by the administration of President Barack Obama, caught the carriers by surprise. If successful it would end AT&T's move to unseat Verizon Wireless as the top US mobile carrier.
If AT&T fails to defeat the Justice Department lawsuit, it will prove very costly - it would have to pay T-Mobile parent Deutsche Telekom an estimated US$6 billion in cash and other assets as part of the original deal.
The announcement is a slap in the face for AT&T chief executive Randall Stephenson, who was poised for a career-defining deal that would allow him to emerge from the shadow of predecessor and serial acquirer Ed Whitacre.
The court case could take months and cost millions of dollars. Wall Street immediately signaled the deal was now probably a longshot - shares in the companies fell sharply.
Justice Department officials claimed allowing AT&T to gobble up T-Mobile would be disastrous for consumers.
Deputy Attorney General James Cole said: "Were the merger to proceed, there would only be three providers with 90 percent of the market, and competition among the remaining competitors on all dimensions, including price, quality and innovation, would be diminished."
The lawsuit comes only five months after the deal was announced. One source close to the case said it was an attempt to halt a "fundamentally flawed" deal, not a tactic to wring big concessions from AT&T. They would have to give up "so much" to win approval, the source said.
Justice Department officials said they were willing to consider proposals to ameliorate their concerns, but they expected the fight to go to court. A source close to one of the carriers said they may have to offer to divest up to 25 percent of assets to try to save the deal.
The government's lawsuit overshadowed an announcement just hours earlier by AT&T that it would bring 5,000 call center jobs back to the US if the deal closed.
The surprise move on Wednesday, the biggest antitrust challenge yet by the administration of President Barack Obama, caught the carriers by surprise. If successful it would end AT&T's move to unseat Verizon Wireless as the top US mobile carrier.
If AT&T fails to defeat the Justice Department lawsuit, it will prove very costly - it would have to pay T-Mobile parent Deutsche Telekom an estimated US$6 billion in cash and other assets as part of the original deal.
The announcement is a slap in the face for AT&T chief executive Randall Stephenson, who was poised for a career-defining deal that would allow him to emerge from the shadow of predecessor and serial acquirer Ed Whitacre.
The court case could take months and cost millions of dollars. Wall Street immediately signaled the deal was now probably a longshot - shares in the companies fell sharply.
Justice Department officials claimed allowing AT&T to gobble up T-Mobile would be disastrous for consumers.
Deputy Attorney General James Cole said: "Were the merger to proceed, there would only be three providers with 90 percent of the market, and competition among the remaining competitors on all dimensions, including price, quality and innovation, would be diminished."
The lawsuit comes only five months after the deal was announced. One source close to the case said it was an attempt to halt a "fundamentally flawed" deal, not a tactic to wring big concessions from AT&T. They would have to give up "so much" to win approval, the source said.
Justice Department officials said they were willing to consider proposals to ameliorate their concerns, but they expected the fight to go to court. A source close to one of the carriers said they may have to offer to divest up to 25 percent of assets to try to save the deal.
The government's lawsuit overshadowed an announcement just hours earlier by AT&T that it would bring 5,000 call center jobs back to the US if the deal closed.
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