Josh OngAT&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.
Andrew Orr
Wesley Hilliard
Malcolm Owen
Christine McKee
William Gallagher
17 Comments
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.
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).
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?
Actually I think this might be the solution except think bigger ... sell off a few states! ... it might start a trend!
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.