DOJ to block AT&T's acquisition of T-Mobile USA

The deal would give mobile customers better service, the companies have argued

The U.S. Department of Justice has filed a lawsuit to block AT&T from acquiring mobile competitor T-Mobile USA, with the agency saying the $39 billion deal would significantly reduce competition, jack up prices, and stifle innovation.

The DOJ lawsuit, filed Wednesday in U.S. District Court for the District of Columbia, points to T-Mobile USA's role as a low-cost competitor to the three other nationwide mobile carriers as a reason to block the deal.

[ AT&T had just announced it would return jobs to the U.S. if the T-Mobile deal was approved. | Stay ahead of the key tech business news with InfoWorld's Today's Headlines: First Look newsletter. ]

"The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices, and lower-quality products for mobile wireless services," Deputy Attorney General James Cole said in a statement. "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."

AT&T is confident the company will prevail in court, said Wayne Watts, AT&T's senior executive vice president and general counsel.

AT&T plans to ask for an expedited court hearing "so the enormous benefits of this merger can be fully reviewed," Watts said in a statement. "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.

Earlier Wednesday, AT&T said it would bring back 5,000 outsourced call-center jobs to the U.S. if the deal was approved.

AT&T and T-Mobile, owned by Deutsche Telekom, compete head-to-head in 97 of the nation's 100 largest cellular marketing areas, the complaint said. The deal would eliminate T-Mobile as a "disruptive force" in the mobile industry through low prices and innovative services, the DOJ said in a press release.

T-Mobile offered the first smartphone using the Android OS, the first BlackBerry wireless email, and the first national Wi-Fi hotspot access, the DOJ said. T-Mobile was the first U.S. company to roll out a nationwide data network based on advanced HSPA+ (High-Speed Packet Access) technology, the agency said. AT&T felt competitive pressure from T-Mobile, and from its HSPA+ offering, Cole said.

T-Mobile sees itself as "the No. 1 value challenger of the established big guys in the market," according to company documents quoted in the DOJ complaint. T-Mobile's strategy is to "attack incumbents and find innovative ways to overcome scale disadvantages. [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small," the documents added.

The DOJ looked seriously at the benefits AT&T and T-Mobile talked about, the agency said. AT&T did not demonstrate that the deal "promised any efficiencies that would be sufficient to outweigh the transaction's substantial adverse impact on competition and consumers," the DOJ said.

Critics have said the acquisition would reduce the number of nationwide mobile carriers from four to three and could lead to higher mobile service prices with low-cost competitor T-Mobile eliminated. AT&T could better use the $39 billion to build out and improve its existing network, critics have said.