The U.S. Department of Justice (DOJ) filed a civil antitrust lawsuit in the federal court Wednesday to thwart AT&T's proposed $39 billion takeover of T-Mobile USA.
The Justice Department said that the AT&T/T-Mobile merger will shrink competition among wireless carriers and hurt consumer interest.
According to them, a deal between two of the country’s largest cellphone companies would lead to rise prices, less variety in products and poor service quality for the customers.
Deputy Attorney-General James M. Cole, stated, "Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation's wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”
"AT&T's elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market.” --Justice Department.
Elimination of a competitive force
AT&T, T-Mobile USA, Sprint Nextel and Verizon are the top four providers of mobile services in the United States. These companies together account for more than 90 percent of mobile wireless connections in the nation.
However, AT&T and T-Mobile deal would hamper competition. Moreover, the proposed transaction would also prevent potential entry of new mobile services providers.
"AT&T's elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market," said the Justice Department.
Meanwhile, AT&T claims the merger will lead to billions of dollars in investment and create as many as 96,000 quality jobs.
They intend to use T-Mobile’s towers and airways to improve wireless service quality to customers and expand the 4G network across most of the country especially in rural areas.
AT&T Executive Vice President and General Counsel Wayne Watts stated, "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.
He added, "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 anticompetitive affects and we intend to vigorously contest this matter in court."
Following the news, AT&T shares fell 4 percent while those of T-Mobile slided 5 percent. Shares of competitor Sprint Nextel climbed more than 6 percent.