Justice Department Blocks AT&T, T-Mobile Merger

Sep 1, 2011
Originally published on September 1, 2011 6:00 am
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STEVE INSKEEP, Host:

NPR's Jim Zarroli explains why the government turned aside AT&T's sales pitch.

JIM ZARROLI: AT&T had spent months lobbying the public and the government to support the $39 billion acquisition. But in the end, the Justice Department turned the company down. Here was Sharis Pozen, acting head of the department's antitrust division.

SHARIS POZEN: A combination of AT&T and T-Mobile would eliminate this price competition and innovation. It would reduce the number of nationwide competitors in the marketplace from four to three.

ZARROLI: The deal had been opposed by a wide range of consumer groups, and many were jubilant over the government's decision. Andrew J. Schwartzman is president of the Media Access Project.

ANDREW J: The fact that the Department of Justice took action is not all that surprising. The law could not be more straightforward.

ZARROLI: The government's decision poses big questions about where the wireless industry is going. Morgan Reed is executive director of the Association for Competitive Technology, which represents creators of mobile apps for cell phones. He notes there's a real need for wireless companies to expand and improve their data networks.

MORGAN REED: Unless they build out the next generation, we're going to be crushed on capacity use.

ZARROLI: Reed says Deutsche Telecom, which owns T-Mobile USA, has shown little inclination to invest in its wireless network, but AT&T has. And allowing it to acquire T-Mobile would mean much more wireless capacity for the country as a whole. Reed says he's not so worried about the effect of the merger on AT&T's prices.

REED: I think that there's enough pressure from Verizon and others that I think that I'm not as worried about that. I'm more worried about being able to roll out the apps that depend on the data network.

ZARROLI: The case will now move into federal court. Jim Speta of Northwestern University Law School says the Justice Department will ask a judge to grant a preliminary injunction against the deal.

JIM SPETA: Ultimately, in this case, the government bears the burden of proof to prove that the merger will decrease competition and to get a court order that blocks the merger.

ZARROLI: AT&T can try to fight the injunction and ultimately even go to trial. But doing so may be a lot more trouble than it's worth. Speta says a trial would drag out the dispute.

SPETA: I think in this situation, the market may not be willing to wait the whole year or year-and-a-half that a trial would take, and the market itself may sort of force the resolution.

ZARROLI: Jim Zarroli, NPR News, New York.

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