Justice Department Files Suit to Block AT&T Acquisition of T-Mobile

9:00 AM PST 08/31/2011 by Georg Szalai

The $39 billion telecom deal could affect entertainment companies as the combined entity could change the market for mobile video and other content.

NEW YORK - The U.S. Justice Department said Wednesday that it has filed a lawsuit to block AT&T's proposed $39 billion acquisition of T-Mobile USA, which would create the country's largest wireless carrier.
 
The Justice Department cited concerns that reduced competition would affect pricing and innovation.

Observers have said that the proposed giant telecom deal could affect the combined entity's approach to mobile video and other content - something entertainment companies would want to keep an eye on. So far, it hasn't been clear though what kind of changes, if any, the deal could trigger beyond eliminating one potential deal partner for content providers.

Mobile revenue has remained a small financial contributor for entertainment giants, but it has been a growing business, and the fast growth of tablet computers has put a spotlight on it.

It wasn't immediately clear if the Justice Department's decision would have any effect on another proposed deal in the wireless space - Internet giant Google's recent announcement that it would acquire handset maker Motorola Mobility for $12.5 billion.

But among other critcis, Charlie Ergen's Dish Network has also filed papers opposing the merger. "A combined AT&T/T-Mobile would harm consumers by reducing competition and by raising barriers to entry for potential new entrants like Dish Network," the company said in a statement applauding the Justice Department's lawsuit. Dish recently filed documents for the possible launch of a broadband network.

“By filing suit today, the Department of Justice has concluded that AT&T's acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws," said FCC chairman Julius Genachowski in a statement. "Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile.”

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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