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September 13, 2011

AT&T responds to DoJ over T-Mobile deal

Merger will lead to more competition and lower prices, argues company

By CBR Staff Writer

AT&T has responded to the antitrust lawsuit filed by the Department of Justice (DoJ) over the company’s proposed deal to buy T-Mobile USA for $39bn.

As promised earlier after the DoJ and Federal Communications Commission (FCC) raised objections to the proposed acquisition, AT&T has written a detailed letter saying that contrary to claims made by the regulators, the deal would be good for the American consumers.

At&T and T-Mobile are the second and fourth biggest wireless carriers in the US.

In March, AT&T and Deutsche Telekom entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction valued at approximately $39bn.

As part of the transaction, Deutsche Telekom will receive an equity stake in AT&T that would give Deutsche Telekom an ownership interest in AT&T of approximately 8% and a Deutsche Telekom representative will join the AT&T Board of Directors.

AT&T has assured that the merger will not cause any job losses and that the deal will actually increase job opportunities and competition.

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However, after ereviewing the deal, the DoJ and FCC said that the merger would reduce competition and go against the ineterests of the American consumer.

The DOJ filed an antitrust lawsuit against the proposed merger, saying that it would "substantially lessen competition for mobile wireless telecommunications services" across the country.

The DOJ says that less competition would lead to price hikes, poorer quality services and less innovation.
"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 M. Cole said in a statement.

FCC chairman Julius Genachowski said, "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."

AT&T responded in a detailed letter to the Justice Department, claiming teh deal would be good for customers, increase competition and actually lower prices.

The company said, "The new network will be more than the sum of its parts: as a result of engineering efficiencies enabled by the transaction, the combined capacity of the new firm will be significantly greater than what the two companies could do separately. That means increased output, higher quality service, fewer dropped calls, and lower prices to consumers than without the merger."

At&T added that rather than substantially reducing competition, the combined firm will usher in more intense competition.

The company also said that the DoJ’s complaint fails to come to grips with the significant efficiencies this transaction will generate.

"Wireless competition is fierce: prices have declined steadily, output is expanding, technological innovation is occurring at an extraordinary pace, and new providers with innovative business models have successfully entered and expanded. All of this will continue, and likely increase, after the transaction.

"The complaint largely ignores the significant competition from established providers such as Verizon Wireless and Sprint, innovative upstarts such as MetroPCS and Leap/Cricket, and strong regional providers like US Cellular and Cellular South, among others.

"The Department does not and cannot explain how, in the face of all of these aggressive rivals, the combined AT&T/T-Mobile will have any ability or incentive to restrict output, raise prices, or slow innovation. Nor can it explain how T-Mobile, the only major carrier to have actually lost subscribers in a robustly growing market, provides a unique competitive constraint on AT&T.

"It also fails to acknowledge that surging customer demand for wireless services drives carriers to invest, expand, and innovate," claimed AT&T.

AT&T continues to say that the deal would bring 5,000 jobs to the US, a claim disputed by rival Sprint.

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