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Wednesday, August 31, 2011, 07:42 am PT (10:42 am ET)

US government files antitrust suit to block AT&T purchase of T-Mobile

AT&T's planned purchase of carrier T-Mobile hit a snag on Wednesday when the U.S. government filed an antitrust lawsuit to block the proposed deal, saying it would hurt competition in the American wireless industry.

The government believes the $39 billion deal with "substantially lessen competition" in the wireless market, according to Bloomberg. The U.S. Justice Department filed the complaint in federal court on Wednesday in Washington.

"AT&T's elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market," the filing reads.

AT&T announced in March that it hopes to acquire Deutsche Telekom's American T-Mobile subsidiary in a cash and stock deal worth $39 billion. The deal would give the German carrier an 8 percent stake in AT&T.

T-Mobile and AT&T share similar GSM and UMTS/HSPA networks, and AT&T has claimed that the addition of T-Mobile would allow it to offer faster network performance and better coverage for its customers.

One of the largest opponents to the deal has been Sprint, the third largest carrier in the U.S., ahead of only T-Mobile in terms of subscribers among the "big four." Sprint has formally petitioned the merger with the U.S. Federal Communications Commission, accusing AT&T of wasting spectrum it already owns, and attempting to convince the government that a deal with T-Mobile would hurt the profitability of Sprint.

AT&T


AT&T and T-Mobile executives were grilled by members of the U.S. Senate in May during a hearing on the proposed deal. Members of the Senate Judiciary subcommittee expressed skepticism over alleged benefits to consumers from the deal that have been portrayed by the two companies pitching the deal.

Since the launch of the original iPhone in 2007, AT&T has faced skyrocketing data traffic, which the carrier has said shot up 8,000 percent in the last four years. The significant bandwidth consumed by active iPhone users led one high-profile report from The New York Times to refer to Apple's handset as the "Hummer of cellphones," referring to the gas-guzzling vehicle.

AT&T has argued that the U.S. wireless industry will remain "vibrantly competitive" if the T-Mobile purchase were to gain federal approval. In expanding its 4G long-term evolution network and merging the two companies' wireless networks, AT&T has asserted that the deal would create jobs and generate economic growth.

Earlier this month, it was reported that AT&T is also considering the sale of some $8 billion in network assets to gain regulatory approval to purchase T-Mobile. From the beginning, AT&T was characterized as facing a "steep climb" to receive approval from the Federal Communications Commission.