US Seeks to Block AT&T-Mobile: What Will Happen Now?

As is being widely reported, and in a move that frankly surpised me, the US has filed an action to prevent AT&T's takeover of the US business of T-Mobile, worth roughly $39 billion. The government cites diminished competition and potentially increased prices for consumers. 

Here's an excerpt from the complaint, quoted by the NY Times:

“AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the complaint said. “Thus, unless this acquisition is enjoined, customers of mobile wireless telecommunications services likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest than would exist absent the merger.”

AT&T wants the spectrum that T-Mobile now owns. The company has been trying to argue that consolidation of the number one and number four carriers in the US won't hurt competition. However the US obviously didn't buy it.

Bloomberg reports that should the transaction not take place AT&T will have to pay T-Mobile the equivalent of $7 billion in spectrum and fees: 

Should regulators reject the deal, which would create the biggest U.S. wireless carrier, AT&T would have to pay Deutsche Telekom $3 billion in cash. It would also provide T-Mobile USA with wireless spectrum in some regions and reduced charges for calls into AT&T’s network, for a total package valued at as much as $7 billion, Deutsche Telekom said this month. 

This suggests that AT&T will fight the suit, though a negotiated settlement may still be possible. Earlier AT&T was trying to sweeten the pot for the US saying that it would return 5,000 call center jobs, currently offshore, to the US if the deal were approved. 

Shares of AT&T were down and Sprint was up after the news came out. 

When I first heard of the intended AT&T-Mobile merger I wrote that there was a 50% chance that the deal would get blocked. That's because despite the obvious anti-competitive dimensions, the US doesn't have the moxie to oppose "too big to fail" transactions like this. This time apparently they do.