Justice Dept. takes steps to block AT&T, T-mobile merger

Executives at AT&T attend a news conference where it was announced that AT&T Inc. will be buying its wireless rival T-Mobile USA from Deutsche Telekom AG for $39 billion in cash and stock on March 21, 2011 in New York City.

Steve Chiotakis: The U.S. Justice Department has filed suit to block the $39 billion deal between telecom giants AT&T and T-Mobile because of anti-trust concerns. AT&T is challenging the lawsuit. The proposed deal would join
the nation's second and fourth biggest wireless providers.

Cecilia Kang is technology reporter for the Washington Post. And she's with us now from DC. Good morning, Ceclia.

Cecilia Kang: Good morning.

Chiotakis: Why specifically has the Justice Department
come down against this merger?

Kang: Well they say anyway you look at it -- this is a quote from one of the officials -- "it looks anti-competitive." And this is a really, in some ways, a clean analysis that the Justice Department had to make, in that these are two identical businesses. And it really showed that they would reduce the number of national carriers from four to three. So, I mean it's pretty simple, the anti-trust evaluation of this. And they said because the number of carriers would be reduced, that could lead to harm for consumers. It could lead to higher prices, it could lead to less innovation.

Chiotakis: What is AT&T saying? Because as we reported this morning, right, they're challenging this.

Kang: That's right. So, this is not the end. The Justice Department made this decision -- which was a surpise -- and it was a big decision, because it's approved every other major merger under this administration. But AT&T will challenge this in the courts. The way that this works is the Justice Department filed a lawsuit in a Federal court to block the deal. So, AT&T in that court will challenge the Justice Department's decision. It's very much in AT&T's nature, its culture, to do this. It's not unfamiliar with lawsuits and with merger proceders. It is sort of the original company that was broken up by the Justice Department many years ago.

Chiotakis: Bell, right?

Kang: That's right. And it has a lot at stake. It has a $3 billion break-up fee penalty it would have to pay to T-mobile. And it would have to also give T-mobile a bunch of airwaves, spectrum -- a very valuable asset -- if the deal is not completed and approved by September 2012. So AT&T right now is looking at the clock and thinking we've got all this stuff on the table that we could lose -- a big penalty fee, a lot of spectrum -- why not fight it in court? And that's exactly what they plan to do.

Chiotakis: Alright, Cecilia Kang from the Washington Post. Cecilia, thanks!

Kang: You bet.

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