Justice Department antitrust suit caught AT&T by surprise

Posted:
in General Discussion edited January 2014
A recently filed antitrust lawsuit by the U.S. Department of Justice opposing AT&T's proposed acquisition of T-Mobile USA took executives by surprise, as they thought they would have more time to present their case, according to a new report.



AT&T CEO Randall Stephenson said in a television interview early Wednesday that he expected the $39 billion transaction to go through in the first quarter of 2012, but the Justice Department called his lawyers an hour later notifying them that the federal agency was suing to block the merger, Bloomberg reports.



?We are deep into the analysis with the Department of Justice, and it?s all the questions and data gathering you might expect,? Stephenson had said in the interview.



The suit came just a day after a Justice Department meeting to discuss the matter. According to people involved in the meeting, AT&T believed it would have "more time to present ideas that would assuage the government's reservations about the deal."



Insiders indicated that the DoJ had decided that the two companies weren't responding to concerns that the acquisition would hurt competition and result in higher prices for consumers. One source said skepticism at the agency had been mounting for weeks after a technical review of the U.S. wireless market found the deal to be "highly anticompetitive."



AT&T announced the $39 billion deal in March. As the biggest deal of the year, the merger quickly came under scrutiny from the Federal Communications Commission and the Department of Justice. From the outset, the company has reportedly faced a "steep climb" on its way to receiving approval for the transaction.



Tuesday's DoJ meeting brought together more than 40 people, including "representatives of AT&T, T-Mobile, a unit of Bonn-based Deutsche Telekom AG (DTE), the Justice Department and the Pennsylvania attorney general." Officials from several state attorneys generals' offices, including California and New York, reportedly participated by phone. Part of the reason AT&T was caught unawares by the antitrust suit was because Justice Department lawyers had asked "thoughtful rather than confrontational" questions during the meeting, sources said.



After hearing the companies argue in favor of the merger, Sharis Pozen, the acting chief of the antitrust division, voiced concerns that the deal "would leave local and national wireless markets to concentrated." She also worried that dropping to just three major wireless players would have a negative effect.



But Stephenson and his lawyers did not expect Pozen's concerns to materialize into a lawsuit the following day. ?The news caught everybody by surprise,? said Steve Largent, CEO of CTIA-The Wireless Association. ?AT&T was in the middle of explaining and detailing the merger that was being proposed when the Justice Department filed."



Pozen said Wednesday that she had repeatedly informed AT&T of the agency's issues with the deal. ?We have been in constant dialogue with the parties, exploring their arguments, exploring the materials they have provided, asking questions, engaging fully with them,? she said, offering a glimmer of open by adding that the DoJ's "door is open" for further discussion.



But the department's decisive action with the lawsuit does not portend well for AT&T, which would may have to pay as much as $6 billion in break-up fees to T-Mobile parent company Deutsche Telekom if the deal fell through.



?It is true that you can always settle a case, but the Justice Department doesn?t use litigation as a settlement tactic,? said Harold Feld, the legal director of a consumer group opposing the deal. ?This merger creates dangerous levels of concentration in 97 of the top 100 markets-- there isn?t a cure for that. It?s not like you can sell Chatanooga and give up a few licenses in Milwaukee,? he said.



Last month, sources suggested that AT&T is reportedly considering selling off $8 billion in assets as concessions to make the deal happen. According to Reuters, the company's back-up plan may include selling off as much as 25 percent of T-Mobile's assets to make the arrangement more palatable for antitrust officials.

Comments

  • Reply 1 of 17
    Can the Justice Department or some other federal agency "give back" the world standard GSM and 3G spectrum to Sprint and Verizon? And give AT&T CDMA and 4G spectrum Sprint and Verizon owns?



    It sounds absurd the way I suggest it but the moment Sprint, Verizon and AT&T+T-Mobile all have access to a unified set of spectrum all this monopoly concerns go away, because that levels the playing field.



    Yes, competition within the US can strengthen US companies but on a global playing field carving up the US into unique spectrum "domains" breeds a wasteful intra-country feudal system. The fat trigarchy living off the backs of the hard working American people and looking to milk them even more as demand for mobile data grows... can only go so far, just like the failing and decrepit US banking system.



    The US needs Sprint, Verizon and AT&T all not only serving their own markets but seeking new income from outside the US - whether it be in telco and data services, devices, infrastructure, software, enterprise systems or whatever.



    Sprint, Verizon and AT&T competing among themselves is all well and good but if you look at the success and profit growth of Apple, Google and even RIM (for now) it's because of developing products and services that look well beyond North America.



    The US economy will never re-start at a significant pace unless new money is brought in rather than continuing to "make" their own money out of thin air.



    Where is Sprint, Verizon and AT&T going to get more revenue? Basically from more contracts, ie. debt, ie. made-up-money.



    Feel free to tell me I'm crazy, but definitely tell me if and why I'm wrong.
  • Reply 2 of 17
    Quote:
    Originally Posted by nvidia2008 View Post


    Feel free to tell me I'm crazy, but definitely tell me if and why I'm wrong.



    This is not crazy at all. You raise three very basic issues: one, there is a huge spectrum deficit, two these companies are sort of going sideways, wondering where growth is going to come from, and three, in a thoroughly globalized world that needs something as fundamental as communications to keep going, we have a bunch of atavistic, 20th century territorial businesses controlling the pipes.



    Perhaps the US, the EU, Japan, and BRIC countries need to get together to organize some type of confab to start to think about creating the context for to make this a truly globalized industry. That, in turn, will mean allowing major cross-border acquisitions for starters.



    On a side note, these boards have been very opposed to the ATT-TMobile merger. I think it should have been allowed, and the Justice Dept is making a mistake. TMobile will be sold off or spun off anyway, the only issue being whether it was sold to the highest bidder who could utilize the assets most efficiently (ATT).
  • Reply 3 of 17
    lilgto64lilgto64 Posts: 1,147member
    not sure if I can state it any better than already done.



    what stuck me is this:



    [quote]She also worried that dropping to just three major wireless players would have a negative effect. [\\quote]



    where is the evidence or data to support such a position?



    are we now basing decisions like this on someone's gut feeling? (or perhaps we always have and only put data together after the fact to justify that gut feeling).



    Competitive Free Market or Feudal Domains - that is a good question.



    Even if you were to have some sort of contractual agreement or judicial decree that such a merger required that the average price per minute etc did not change for a specified period after the merger - if they (the providers) wanted to they could always find some loophole - no more subsidized phones - or higher activation fees etc - oh I know, lets let the federal government be responsible for writing all the terms and conditions of each carrier's contracts - what could possible go wrong then?
  • Reply 4 of 17
    MacProMacPro Posts: 19,718member
    Quote:
    Originally Posted by AppleInsider View Post




    It’s not like you can sell Chatanooga and give up a few licenses in Milwaukee,” he said.



    Actually I think this might be the solution except think bigger ... sell off a few states! ... it might start a trend!
  • Reply 5 of 17
    Did it strike anyone else as rather odd they filed a suit a day after the meeting? What was the purpose of the meeting if you're going to file a suit anyway which they clearly had to have decided beforehand?



    Regarding looking outside the USA for revenue... it's not like any of these US-based telecom companies can walk into the ultra-protected markets of other countries and just set up shop. Deutche Telekom was about the only to do it (in one place, the USA) and now they want "out" anyway.
  • Reply 6 of 17
    I honestly think they should leave them alone and let the merger go through. If their scared that this merger will spike prices and lower customer services than set some restrictions so that they have to keep low rates. Besides once this merger goes through (if it does) service will get better for ATT customers as well as T-Mobile which means a win win situation for both customers as long as the prices do not go up.
  • Reply 7 of 17
    lilgto64lilgto64 Posts: 1,147member
    Quote:
    Originally Posted by Hudson1 View Post


    Did it strike anyone else as rather odd they filed a suit a day after the meeting? What was the purpose of the meeting if you're going to file a suit anyway which they clearly had to have decided beforehand?



    Regarding looking outside the USA for revenue... it's not like any of these US-based telecom companies can walk into the ultra-protected markets of other countries and just set up shop. Deutche Telekom was about the only to do it (in one place, the USA) and now they want "out" anyway.



    How is it clear that they decided before hand? perhaps they had the meeting as a last effort to avoid the suit and nothing came out of the meeting to stop the need for the suit?





    Quote:
    Originally Posted by Jaedre View Post


    I honestly think they should leave them alone and let the merger go through. If their scared that this merger will spike prices and lower customer services than set some restrictions so that they have to keep low rates. Besides once this merger goes through (if it does) service will get better for ATT customers as well as T-Mobile which means a win win situation for both customers as long as the prices do not go up.



    Yeah - isn't at least part of AT&T's position that they need the additional subscribers and infrastructure of T-Mobile in order to remain competitive with Verizon?



    how is artificially forcing there to be more competition in the market place that is needed helping things?



    the government should definitely get more involved - just look how well that worked out for the housing industry and the banking industry etc.
  • Reply 8 of 17
    I seriously doubt that it is possible to have "dangerous levels of concentration."



    I wonder if these guys actually have, or at the very least, know how to use smartphones for anything but phone calls?



    If this gives ATT adequate coverage in some areas for a few years, they can put the money into areas that have dangerous levels of no coverage.
  • Reply 9 of 17
    jexusjexus Posts: 373member
    Quote:
    Originally Posted by Jaedre View Post


    I honestly think they should leave them alone and let the merger go through. If their scared that this merger will spike prices and lower customer services than set some restrictions so that they have to keep low rates. Besides once this merger goes through (if it does) service will get better for ATT customers as well as T-Mobile which means a win win situation for both customers as long as the prices do not go up.



    wrong wrong wrong. The government putting a set limit to how high rates can go and conditions will do nothing. If ATT cannot charge more than a certain amount involving service, that is profit that it is not making so then they will just add new services and impose rates on them, distributing the rise. Through this they are not technically raising rates, but simply adding more to make up for lost revenue and in most cases charge you MORE. This is legal and almost always performed. Economics 101.



    The Government would be able to do nothing, unless you think US citizens will be happy to pay extra taxes to subsidize ATT to keep rates low.





    Quote:
    Originally Posted by Inklings2 View Post


    I seriously doubt that it is possible to have "dangerous levels of concentration."



    I wonder if these guys actually have, or at the very least, know how to use smartphones for anything but phone calls?



    If this gives ATT adequate coverage in some areas for a few years, they can put the money into areas that have dangerous levels of no coverage.



    Your not understanding how telecos operate. They don't expand into remote areas because there is no profit to be made. ATT has plenty of unused spectrum. They'll gladly roll out dozens of towers for urban areas because the population there is sufficient to generate income.



    ATT is not going to spend money building towers and establishing service to only have 100 or so people in a northern region of Montana because those 100 people even if they all do sign up will not be able to stem the cost of operation and initial investment, not to mention the assorted taxes.
  • Reply 10 of 17
    Quote:
    Originally Posted by lilgto64 View Post


    How is it clear that they decided before hand? perhaps they had the meeting as a last effort to avoid the suit and nothing came out of the meeting to stop the need for the suit?



    I guess I thought that was the case because there was no indication in the article that the DOJ wanted to discuss or negotiate a solution in the meeting. If they wanted to reach a resolution there, what did they do to try to achieve that?
  • Reply 11 of 17
    quinneyquinney Posts: 2,528member
    Quote:
    Originally Posted by AppleInsider View Post


    A recently filed antitrust lawsuit by the U.S. Department of Justice opposing AT&T's proposed acquisition of T-Mobile USA took executives by surprise, as they thought they would have more time to present their case, according to a new report.



    "Present their case" as in present their briefcase full of "campaign contributions".
  • Reply 12 of 17
    sheffsheff Posts: 1,407member
    I've got it!!!!



    Let T-MO join ATT. Then, throw a curveball and start monopoly proceedings against ATT-Mo and split it into to equal sized carriers.
  • Reply 13 of 17
    Quote:
    Originally Posted by sheff View Post


    I've got it!!!!



    Let T-MO join ATT. Then, throw a curveball and start monopoly proceedings against ATT-Mo and split it into to equal sized carriers.



    A monopoly with less than 50% market share? Interesting and original concept, I'll give you that.
  • Reply 14 of 17
    Quote:
    Originally Posted by sheff View Post


    I've got it!!!!



    Let T-MO join ATT. Then, throw a curveball and start monopoly proceedings against ATT-Mo and split it into to equal sized carriers.



    They did that in the 80s.



    It didn't work. We're back down to four carriers going on three (Actually going on two. Sprint's next to dead). Unless they enforce NO BUY-OUTS, eventually they'll ALL go through under some twisted justification or another.
  • Reply 15 of 17
    It appears that the DoJ is starting make more irrational decisions lately. The DoJ must have nothing better to do than knitpick and stall corporate business matters at random (i.e. Gibson and now AT&T) resulting in companies having to pay fees for disruption of services and cancelled deals.



    Here's a thought (probably already posted), Apple should just buy T-Mobile, rename it to i-Mobile and undercut everyone elses wireless and data plans. In no time flat, i-Mobile would expand T-Mobiles current coverage area and offer better data services and would become a major competitor to AT&T, Sprint and Verizon making them rethink their current plans and services. Then Apple could offer in-network features such as on-demand TV & Movie services for iTunes via LTE for iOS devices.
  • Reply 16 of 17
    This is my opinion, I feel that the Feds just killed Tmobile, This deal was a must for them, even more than for ATT, IMO it was going to be a win win situation, now I have the feeling that T-mobile is heading for a financial crash, and then we will witness another bidding war for their technology and customer base.



    It seems the trend today, bidding wars for dead companies technologies...and who is the loser? the consumer, those billions of dollars invested in those biddings will be paid by the consumer..



    A merger would have been cleaner, simpler, and even a win win for consumers, not only for ATT and T-mobile...



    George
  • Reply 17 of 17
    The level of idiocy here is amazing.



    This merger will destroy any hope of competition for cell phone service in the US. It will be horrific for customers of ANY company.



    If the DOJ doesn't manage to stop it, you can expect higher prices, you can expect Sprint to be absorbed into either ATT or Verizon within two years, you can expect data caps forever, and you can expect more dropped calls.



    You can expect many thousands of former T-Mobile employees to lose their jobs.



    The robber barons are back, and they've got the poor fools on their side this time. This merger isn't "free market", this merger is yet another step from freedom to fascism.
Sign In or Register to comment.