The U.S. Department of Justice on Wednesday filed a lawsuit to block AT&T’s (NYSE: T) $39 billion deal to buy mobile rival T-Mobile USA, saying the deal, if completed, would significantly reduce competition and raise prices.
“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,” Deputy Attorney-General James Cole said in a statement. ”This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”
Shares of AT&T shares fell $1.14, or almost 4%, to $28.48, on heavy volume of 112.6 million shares. Shares of Sprint, which lobbied against the takeover deal, gained almost 6% to $3.76, on volume of 196.4 million shares.
“AT&T and T-Mobile, a subsidiary of Germany-based Deutsche Telekom, compete head-to-head in 97 of the nation’s 100 largest cellular marketing areas,” according to the complaint. The DOJ said the deal would eliminate T-Mobile as a “disruptive force” in the mobile industry through low prices and innovative services.
AT&T said it was surprised and disappointed with the government’s move and that it will ask for an expedited hearing in the matter.
“The DOJ has the burden of proving alleged anti-competitive affects, and we intend to vigorously contest this matter in court,” Wayne Watts, AT&T general counsel, said in a statement.
AT&T’s takeover deal, which was announced during the first quarter of this year, was seen to enable the company to add capacity and meet demand for high-speed wireless service. Expectations have it that the combination the second- and fourth-largest carriers will create a new market leader ahead of current No. 1 Verizon Wireless.
“The DOJ’s opposition to the deal may not mean the merger is dead,” according to Jeff Kagan, an independent telecom analyst. “I think the government is simply saying this deal, the way it is structured, will not be approved. So AT&T must change the structure and they will. They will reintroduce this deal and it will be under consideration again.”
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