Breaking: regulator grows a Bachmann-like titanium spine, markets caught by surprise.
Report from Bloomberg:
The U.S. government sued to block AT&T’s proposed $39 billion acquisition of T-Mobile USA Inc., saying the deal would “substantially lessen competition” in the wireless market.
The Justice Department complaint was filed today in federal court in Washington. The U.S. is seeking a declaration that Dallas-based AT&T’s takeover of T-Mobile, a unit of Deutsche Telekom AG (DTE), would violate U.S. antitrust law and a court order blocking any arrangement implementing the deal.
“AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the U.S. said in its filing.
Here’s the reaction at pixel time (from left to right on the top: Sprint, Verizon, AT&T and Deutsche Telekom):
Back in March, when the deal was announced, the FT’s John Gapper wrote a powerful column on why the DoJ should “just say no”. It now deserves another read:
The deal should be blocked by US regulators and the Department of Justice. It is not pique that makes me say this. Unless they are stopped, Verizon and AT&T are on their way to replicating in mobile the power they exert in fixed-line telephony and broadband – lack of competition means most consumers can only choose between one phone company and one cable company.
…
When a company wraps itself in the flag so blatantly, it pays to look at the fine print. AT&T insisted that US consolidation has not hurt price competition, quoting a US General Accountability Office report saying that US mobile service charges fell 50 per cent between 1999 and 2009. The report itself, however, showed that the bulk of the cuts occurred between 1999 and 2001.
At that time, the US was one of the most competitive mobile markets in the world, with six main providers. Consolidation has since taken it from the top of league tables to the middle, on the concentration index used by US antitrust regulators, and this deal would sink it close to the bottom.
AT&T also produced figures showing that five or more providers are present in 18 of the top 20 US cities. The reality is, however, that none of these competitors, apart from Sprint, has more than a tiny share and Sprint’s chances of joining forces with T-Mobile to compete more effectively with the top two would be killed by an AT&T deal.
The US already performs badly in fixed-line broadband services in terms of price and speed compared with other countries, hurt by Verizon and AT&T having shrugged off the imposition of competition. The last thing the US now needs is AT&T, which already has mobile operating margins of more than 40 per cent, pulling that trick again.
There’s an announcement due from DoJ at around 11am New York time — we’ll provide an update when that happens.
For now, it looks like AT&T’s promise of 5,000 “new” jobs from the merger wasn’t quite enough for the US government.