Obama administration sues to block AT&T – T-Mobile merger

posted at 11:25 am on August 31, 2011 by Ed Morrissey

Here’s a bit of a surprise:

The U.S. government sued to block AT&T’s proposed $39 billion acquisition of T-Mobile USA Inc., saying the deal would “substantially lessen competition” in the wireless market.

The Justice Department complaint was filed today in federal court in Washington. The U.S. is seeking a declaration that Dallas-based AT&T’s takeover of T-Mobile, a unit of Deutsche Telekom AG (DTE), would violate U.S. antitrust law and a court order blocking any arrangement implementing the deal.

This is an interesting choice, but one fraught with some peril for the Obama administration.  The merger would have made T-Mobile an American company as part of AT&T.  It also might have meant a boon for the Communication Workers of America union, which would have been able to absorb the surviving employees of the merger into their ranks.

It’s also curious in that it may not keep T-Mobile from going on the block.  This wasn’t a hostile takeover; DTE wanted to sell its T-Mobile subsidiary, and the only buyers were its competition.  If AT&T doesn’t buy it, then Verizon or Sprint will be the only suitors left for T-Mobile.  If it’s Verizon, then we have the same problem of market consolidation, and Sprint probably doesn’t have the resources to make a good buyer for the network.  Both, however, are American companies as well as AT&T.

The decision to block the merger would pay off rather handsomely for DTE, though — and might convince them to keep T-Mobile in German hands after all:

Should regulators reject the transaction, AT&T would pay Deutsche Telekom $3 billion in cash. It would also provide T-Mobile with wireless spectrum in some regions and reduced charges for calls into AT&T’s network, for a total package valued at as much as $7 billion, Deutsche Telekom said this month.

Well, DTE will be fans of this administration, then, but perhaps not AT&T.  According to Open Secrets, the telecom giant has spent almost a million dollars in this cycle, about two-thirds of it on Democrats.  They won’t be terribly keen on Democrats after costing them $7 billion and a chance to increase its competitive edge in the US.

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Maybe Obama wants to nationalize the wireless market for himself?

Oil Can on August 31, 2011 at 11:28 AM

Somebody wants their payoff.

Anyone else think that they may be leaning on AT&T to do the “phones for poor people” program from places like Philly on the national level?

teke184 on August 31, 2011 at 11:30 AM

Halting the opening of a Boeing plant in SC, raiding Gibson guitar plants over some piddly issue over imported wood…..

He is doing everything in his power to destroy American jobs. Plain and simple.

UltimateBob on August 31, 2011 at 11:30 AM

Obama: Can you hear me now?

faraway on August 31, 2011 at 11:30 AM

Ed read your twitter

William Amos on August 31, 2011 at 11:30 AM

You might have missed this, but an internal email got out that basically showed ATT lied regarding their reasons for the acquisition.

They said publicly that that this would help them increase the size of the network. It turned out that ATT could increase the size for less than $10 billion.

It looks like the plan all along was to cut competition.

evilned on August 31, 2011 at 11:30 AM

Yeah that’s all we need Government Wireless

CommentGuy on August 31, 2011 at 11:31 AM

Good. If I’m forced to lose Tmobile for AT&T I’m dropping them.

Logboy on August 31, 2011 at 11:31 AM

Here’s a bit of a surprise:

What surprise? AT&T is a successful Texas based company.

This administration is at war with Texas.

This is no surprise.

cozmo on August 31, 2011 at 11:31 AM

Good. At&t acquiring tmobile would suck horribly on the consumer end.

mythicknight on August 31, 2011 at 11:31 AM

Should regulators reject the transaction, AT&T would pay Deutsche Telekom $3 billion in cash. It would also provide T-Mobile with wireless spectrum in some regions and reduced charges for calls into AT&T’s network, for a total package valued at as much as $7 billion

Occam’s Razor – it hurts an American corporation, therefore the thug-in-chief goes for it.

Vashta.Nerada on August 31, 2011 at 11:32 AM

Sources say that Madagascan rosewood is used in all of AT&T’s wires.

Weight of Glory on August 31, 2011 at 11:33 AM

yeah…like I don’t get dropped enough already with AT&T…and now OBAMA wants to take it over……might as well get two soup cans and some string……

SDarchitect on August 31, 2011 at 11:34 AM

At&t, reap what you sow

Dear leader is all yours….

cmsinaz on August 31, 2011 at 11:34 AM

*cough* Microsoft *cough*

ProudPalinFan on August 31, 2011 at 11:35 AM

You might have missed this, but an internal email got out that basically showed ATT lied regarding their reasons for the acquisition.

They said publicly that that this would help them increase the size of the network. It turned out that ATT could increase the size for less than $10 billion.

It looks like the plan all along was to cut competition.

evilned on August 31, 2011 at 11:30 AM

Now THAT makes more sense. ‘Cause their network suxs big time. I got the Death Star but an iPhone4. At least they got awesome phones.

ProudPalinFan on August 31, 2011 at 11:40 AM

Awww, I have ATT. The merger would’ve given me better signal in my bathroom.

Apologetic California on August 31, 2011 at 11:41 AM

I would follow the money in the Soros investment fund.

faraway on August 31, 2011 at 11:42 AM

They supported Obutthead, now they get to deal with him. Which is why I won’t use AT&T. So quit sending me crap. Not interested!!!

capejasmine on August 31, 2011 at 11:42 AM

At a news conference Wednesday, Deputy Attorney General James Cole said the combination would result in tens of millions of consumers facing fewer choices and lower-quality products. But the agency said the “door is open” to AT&T to propose remedies in the deal.

AT&T hasn’t applied enough grease for the Democrat Family. Think of it as protection money.

Vashta.Nerada on August 31, 2011 at 11:43 AM

Obama decision making matrix:

Is the situation being contemplated a net positive for America/Americans?

If yes, reject.

If no, alter inputs until answer is yes, then reject blaming Republicans and/or George W. Bush.

And who said that they don’t know what they are doing?

turfmann on August 31, 2011 at 11:44 AM

You might have missed this, but an internal email got out that basically showed ATT lied regarding their reasons for the acquisition.

They said publicly that that this would help them increase the size of the network. It turned out that ATT could increase the size for less than $10 billion.

It looks like the plan all along was to cut competition.

This deal was done for one reason and one reason only- to force out Sprint. At the time the AT&T acquisition was announced, Sprint was preparing to close its own acquisition of T-Mobile, a move that would have finally given it the size and resources to directly compete with AT&T and Verizon. But at the last minute, AT&T swooped in with a much larger offer- an acquisition that made little sense for AT&T given the technology of Sprint’s network. The acquisition was obviously a move to lock out Sprint from turning the mobile space into a true 3 company race.

If AT&T is blocked, the deal between Sprint and T-Mobile is back on, as those companies need to merge to become a truly competitive force. There’s no better outcome for consumers (and if you’re an AT&T mobile customer then you already know how much pain that company inflicts on their customers and the importance of choice in the market). Further, there’s rarely true price competition in a space controlled by a two company monopoly.

bayam on August 31, 2011 at 11:44 AM

DTE wanted to sell its T-Mobile subsidiary, and

 
Yay stock market! Yay jobs! Hip hip, hooray! Hip hip…

rogerb on August 31, 2011 at 11:44 AM

We had AT&T years ago, for our landline, and cell phones. We live rurally, were sick of dial up, and wanted a high speed internet. We called AT&T, asked if we could get it. THey said they would have it out here, in 6 months. That was 5 years ago. After 3 more years of waiting, we dumped them, and haven’t looked back.

We still pay a heavy price for internet. It’s wireless. But I’ll take it, if it means no dial up. And I’ve went with the competition. AT&T can go straight to h-e-double hockey sticks, for all I care.

capejasmine on August 31, 2011 at 11:44 AM

I already switched from T-mobile to Sprint this spring when they first announced it. I have no interest in becoming an AT&T customer after having to talk to my parents with ATT cell phones for the last 10 years. They drop calls all the time regardless where or what I call them from, so I know it’s not my fault. They’re also paying about twice what I am. I think they only stay with it for the phones now.

A question I have about this. Why is ATT forced to pay $3 billion to a company that they’re not allowed to buy? What reasoning is there for this?

Kelligan on August 31, 2011 at 11:46 AM

Good. If I’m forced to lose Tmobile for AT&T I’m dropping them.

Logboy on August 31, 2011 at 11:31 AM

That’s what every TMobile customer I know says… try AT&T once and you ain’t going back.

bayam on August 31, 2011 at 11:47 AM

Should regulators reject the transaction, AT&T would pay Deutsche Telekom $3 billion in cash

 
Sincere question: How much of that will the federal government get?

rogerb on August 31, 2011 at 11:48 AM

They won’t be terribly keen on Democrats

Sure they will! Someone from the DNC will drop by and casually mention “Hey! Ya hear what happened to Gibson?”

GarandFan on August 31, 2011 at 11:49 AM

Seems to me that we are again looking at a market with forces pushing towards a natural monopoly. Sure AT&T is a crappy company that is lying through its teeth, but maybe they can’t help who they are. The solution is not to deny DTE their legal property rights however. Just tell AT&T that if they buy T-Mobile that they can expect the government to crawl up their backside with all kinds of regulated utility requirements and limitations on profit and see how they like that.

pedestrian on August 31, 2011 at 11:49 AM

Why is ATT forced to pay $3 billion to a company that they’re not allowed to buy? What reasoning is there for this?

Kelligan on August 31, 2011 at 11:46 AM

That’s what happens when stupid people arrange a deal with smart people.

pedestrian on August 31, 2011 at 11:51 AM

Should regulators reject the transaction, AT&T would pay Deutsche Telekom $3 billion in cash

It’s called a breakup fee, a standard clause in many large deals. The fact that AT&T agreed to such a large $$ tells you how desperate they were to prevent Sprint from acquiring T-Mobile. AT&T doesn’t want to compete with other companies on the merits of its service and its goal is to lock out competitors.

bayam on August 31, 2011 at 11:52 AM

If AT&T doesn’t buy it, then Verizon or Sprint will be the only suitors left for T-Mobile.

It wouldn’t make any sense for Sprint or Verizon to buy T-Mobile. Both use CDMA technology and T-Mobile and ATT use GSM.

Sprint already made this mistake when they bought Nextel (iDen). They are still operating 2 separate networks to this day.

forest on August 31, 2011 at 11:52 AM

A question I have about this. Why is ATT forced to pay $3 billion to a company that they’re not allowed to buy? What reasoning is there for this?

Apparently, AT&T/T-Mobile put this into the cancellation clause of the contract.

My question is what idiot would support this size a cancellation fee in an offer to buy that was SURE to trigger anti-trust concerns?

Maybe they thought that the huge cost would deter the Feds from blocking it?

IF it does get blocked, it would seem like the added value from this payout would make it a very attractive target for Sprint. And harder to argue that the two small guys linking up would really harm competition.

OBQuiet on August 31, 2011 at 11:54 AM

try AT&T once and you ain’t going back.

I only went back to AT&T because I had Sprint and my experience was poor to say the least, mainly on the customer-service side of things.

teke184 on August 31, 2011 at 11:55 AM

I am still mad at the NLRB questioning Boeing’s right to assemble 787 in South Carolina because South Carolina is a right to work state. And, I guess it would be fine if the they were assembled in China………………..or that Chinese Telecom were buying AT&T.

Oh, and I loved to find out that Warren Buffett’s corporation is in a tax fight with the Federal Government over income taxes. I thought he did not mind paying more taxes.

SC.Charlie on August 31, 2011 at 11:56 AM

That’s what every TMobile customer I know says… try AT&T once and you ain’t going back.

bayam on August 31, 2011 at 11:47 AM

T Mobile must REALLY suck. I’m dropping AT&T for Verizon the first second my contract expires.

Chuck Schick on August 31, 2011 at 11:57 AM

It’s time to start burning down the regulators and their stupid rules.

fleiter on August 31, 2011 at 11:58 AM

teke184 on August 31, 2011 at 11:55 AM

I have had nothing but excellent service from them. Then again, the farthest I have lived away from their corporate headquarters since I have had Sprint is 80 miles :)

Wolftech on August 31, 2011 at 12:00 PM

If this means that we can continue to have commercials featuring the T-Mobile Girl In Pink Dress (TMGIPD), I am all in favor.

New_Jersey_Buckeye on August 31, 2011 at 12:00 PM

0bamm’s trying to block the merger? Did AT&T give too much to Republicans?

Wolftech on August 31, 2011 at 12:01 PM

They said publicly that that this would help them increase the size of the network. It turned out that ATT could increase the size for less than $10 billion.

It looks like the plan all along was to cut competition.

evilned on August 31, 2011 at 11:30 AM

I’m sorry but you just have no idea what you’re talking about. AT&T has publicly shown cellular network investments of over $17-18 BILLION each of the past two years alone.

Youngs98 on August 31, 2011 at 12:05 PM

teke184 on August 31, 2011 at 11:55 AM

I have had nothing but excellent service from them. Then again, the farthest I have lived away from their corporate headquarters since I have had Sprint is 80 miles :)

Wolftech on August 31, 2011 at 12:00 PM

My problems were with the corporate-run stores nearest to me, which were the only ones where I could get the particular phone I wanted and could make payments.

The kinds of idiots working there would be lucky to get a job taking orders through a clown’s head, IMHO.

The Sprint corporate store close to my parents’ house was extremely good, but getting to that part of town during the post-Katrina population explosion was near-impossible.

teke184 on August 31, 2011 at 12:07 PM

That’s what every TMobile customer I know says… try AT&T once and you ain’t going back.

bayam on August 31, 2011 at 11:47 AM

I switched from AT&T to T-Mobile a couple of years ago and the call quality is far better.

pedestrian on August 31, 2011 at 12:07 PM

The clueless blocking the wireless.

TXUS on August 31, 2011 at 12:11 PM

Excellent analysis. I would only add that it’s oh so ironic that this administration and this Justice Department, who promote the Chicago Way and actually engage in vendettas against their competitors, pretend to be concerned with “competition”.

Buy Danish on August 31, 2011 at 12:16 PM

My question is what idiot would support this size a cancellation fee in an offer to buy that was SURE to trigger anti-trust concerns?

Maybe they thought that the huge cost would deter the Feds from blocking it?

OBQuiet on August 31, 2011 at 11:54 AM

The reason the break up fee is so large is precisely because they knew it would cause anti-trust issues. This is an incentive for AT&T to fight what they clearly expected was likely to happen. The contract also most likely contains requirements for specific actions within specific time frames by AT&T in order to avoid other penalties and triggers.

These are very common provisions in all contracts when the success of the deal depends on the actions of a third party that only one of the first two parties has the ability to influence.

RadClown on August 31, 2011 at 12:21 PM

I dislike the wireless industry. It’s very restrictive and has several companies that help write the rules, to prevent other cell networks from being setup.

amazingmets on August 31, 2011 at 12:41 PM

They didn’t mind Google buying Motorola Mobility. Maybe Google wants T-Mobile?

Karmi on August 31, 2011 at 12:41 PM

They didn’t mind Google buying Motorola Mobility. Maybe Google wants T-Mobile?

Karmi on August 31, 2011 at 12:41 PM

Google wants Motorola Mobility primarily to get their patent portfolio, so they can then turn around and start suing people to get royalties off of those patents. Google also bought Nortel’s patent portfolio.

Ward Cleaver on August 31, 2011 at 12:46 PM

Classic Marxist Theory.

Shrink the total number of Coporations, the fewer there are, the easier they are to control. Don’t let business get too large unless the Government approves.

JayTee on August 31, 2011 at 12:48 PM

OBQuiet on August 31, 2011 at 11:54 AM

Once public companies announce a merger/sale, they become half-pregnant. Often major investments are put on hold, devaluing the target company if the merger isn’t consummated. (See Union Pacific / Rock Island in the 60′s) The breakup fee is to make sure it is very painful for the suitor to back-out of the commitment.

phreshone on August 31, 2011 at 12:49 PM

Gee! I didn’t know that AT&T dropped calls on purpose. They hate there customers so much that they are doing all sorts of evil things to drive them away.

Grow up! The prices for the plans are similar and all wireless companies have problems with dropped calls depending on where you live. How about you do a little research before you go with a company for a pretty phone?

Vince on August 31, 2011 at 12:51 PM

They didn’t mind Google buying Motorola Mobility. Maybe Google wants T-Mobile?

Ding Ding Ding Ding Ding

ninjapirate on August 31, 2011 at 12:51 PM

there customers

Should be “their” customers.

Vince on August 31, 2011 at 12:52 PM

They didn’t mind Google buying Motorola Mobility. Maybe Google wants T-Mobile?

Ding Ding Ding Ding Ding

It will be either Google or Apple who will be after T-Mobile…

http://seekingalpha.com/article/288119-which-carrier-is-google-likely-to-swallow

ninjapirate on August 31, 2011 at 12:53 PM

AT&T and Verizon both treated me unfairly. AT&T sold an account of mine to another company, unlimited dial up service. The new company they sold me to, without advanced notification ended up taking about $4500 in over use fees from my bank account and I never got it back. Verizon I had a cell phone for 5 years running with them. I had something like a 500 minute plan and the most I used in any given month for those 5 years was about 100 minutes. I broke the phone, called in to cancel my account, and 6 months later I got a collection bill for 6 months of service, post my cancellation, they say my phone was still being used. It was broken in half, I really do not see how that is possible. But even so, the account was cancelled, so how would they allow the phone to connect anyways?

T-Mobile is the only nation wide carrier I trust anymore.

astonerii on August 31, 2011 at 12:57 PM

The obama administration can’t have 5000 jobs coming back to the US. That would ruin his real jobs plan where he shuts down any industry that actually creates jobs.

lonestar1 on August 31, 2011 at 1:03 PM

They also didn’t mind Comcast buying NBC. Oh right, they donate heavily to obama.

lonestar1 on August 31, 2011 at 1:05 PM

I hope the merger is off. It’s been assumed AT&T would turn off T-Mobile’s UMA feature, since it allows you to make free calls (they don’t count against your minutes) anytime your phone is connected via Wi-Fi. T-Mobile also allows free tethering of your phone to your laptop, where AT&T charges for that.

Ward Cleaver on August 31, 2011 at 1:05 PM

At a news conference Wednesday, Deputy Attorney General James Cole said the combination would result in tens of millions of consumers facing fewer choices and lower-quality products. But the agency said the “door is open” to AT&T to propose remedies in the deal.

AT&T hasn’t applied enough grease for the Democrat Family. Think of it as protection money.

Vashta.Nerada on August 31, 2011 at 11:43 AM

Something this stinky is likely what they have in mind: NBC Universal, Comcast Will Allow Black Leaders to Have Influence Over NBC’s News Programming to Gain FCC Merger Approval

slickwillie2001 on August 31, 2011 at 1:16 PM

Doesn’t anybody get it?

Obama reflexively opposes anything that might HELP the economy, particularly if it relies upon market forces to achieve it.

Of course he’s against it.

Adjoran on August 31, 2011 at 1:27 PM

Well, DTE will be fans of this administration, then, but perhaps not AT&T. According to Open Secrets, the telecom giant has spent almost a million dollars in this cycle, about two-thirds of it on Democrats.

Well there you go IDIOTS. You deserve this.

Besides, AT&T sucks as a service. T-Mobile is no great shakes, but I like their open network compared to control freak Verizon’s closed network.

Daemonocracy on August 31, 2011 at 1:46 PM

What the WHUT????????????

“Monopoly” my hind LEG!

Did Verizon simply disappear?

Katfish on August 31, 2011 at 2:18 PM

*cough* Microsoft *cough*

ProudPalinFan on August 31, 2011 at 11:35 AM

Because microsoft was doing absolutely nothing wrong. They’re still moronic corporate cronies whose best code was lifted from BSD Unix. Their grand innovations have been Bob and Clippy. But you can always buy the fix for the last screw-up at a reduced rate.

jdkchem on August 31, 2011 at 3:03 PM

“Monopoly” my hind LEG!

Did Verizon simply disappear?

Katfish on August 31, 2011 at 2:18 PM

AT&T and T-Mobile both use GSM where Verizon and Sprint use CDMA. I can pretty much buy any unlocked GSM phone and use it on either AT&T’s or T-Mobile’s network as well as the rest of the world. Not so with CDMA. In a sense this deal would give AT&T a “monopoly” with respect to GSM. They could block unlocked phones from using their network and justify it by saying it was for security reasons. Do I go to Sprint or Verizon?

jdkchem on August 31, 2011 at 3:11 PM

This sounds like an attack on a Texas based company. Would the merger mean more jobs in Texas?

nazarioj001 on August 31, 2011 at 3:31 PM

AT&T and T-Mobile both use GSM where Verizon and Sprint use CDMA. I can pretty much buy any unlocked GSM phone and use it on either AT&T’s or T-Mobile’s network as well as the rest of the world. Not so with CDMA. In a sense this deal would give AT&T a “monopoly” with respect to GSM. They could block unlocked phones from using their network and justify it by saying it was for security reasons. Do I go to Sprint or Verizon?

jdkchem on August 31, 2011 at 3:11 PM

Currenlty Verizon won’t let you take an unlocked phone from another network and use it on theirs. Sprint is a bit more flexible.

The 3G technologies and frequencies between AT&T and T-Mobile are different. If you were to take a phone used on AT&T and put it on T-Mobile or vice versa, you’ll lose 3G capability.

Sprint and Verizon use the same 3G technology but their 4G tech is different. Verizon is using LTE, which had evolved from GSM while Sprint is using WiMax. Sprint wants to go to LTE because the market dicated it. Their move to WiMax was just to be the first 4G network in the US and get a leg up on the competition.

It will change in the next couple years as all carriers are moving to LTE.

Lay-Z on August 31, 2011 at 4:22 PM

Clearly this makes too much sense in the need for maintaining free market competition coming from this administration…so, how does this benefit the Communists because the merger’s not being fought to help out the consumer?

Dr. ZhivBlago on August 31, 2011 at 4:33 PM

“Sprint probably doesn’t have the resources to make a good buyer for the network.”

Sprint was a couple of pen strokes away from acquiring T-Mobile, when AT&T came in and blind-sided them. This potential merger is terrible for consumers, as it would give AT&T a monopoly over virtually all GSM infrastructure in the United States.

As much as I hate to say this, the DOJ is doing something right. At the very least, this deal needs to heavily scrutinized.

JCred on August 31, 2011 at 5:16 PM

Listen, most of you folks seriously don’t have any idea what you are talking about. The only possible player to buy T-Mobile in any serious way is AT&T, because the networks are essentially the same and could be integrated in a fairly quick manner.

Most of the jobs that would be lost are marketing and HR types. Technicians would be necessary to maintain the vastly increased network, and remember that AT&T is spending 20 billion dollars on LTE buildout this year.

That’s right, I work for AT&T. Most of you on here hating on the merger don’t realize you are siding with an administration that is consigning possibly hundreds of thousands of jobs to doom instead of possibly tens of thousands. Deutsche Telekom, T-Mo’s parent company, is defending the merger because they want to sell. They want to sell because even though T-Mo is barely profitable, they can never hope to recoup even their initial investment.

You know what the number one expense of any wireless carrier is? Backhaul. And do you know who we get that from? Typically, whoever the ILEC is. So if Verizon drops a massive backhaul link which drops 30 of my towers and I have a gaping hole in my coverage, who looks like an az$hole? That’s right, AT&T. Took them a long time to fix too, but it’s not the Verizon Wireless customers they dropped, is it?

When any of you can tell me what an Abis or an IuR link is without hitting Wiki, maybe you can talk. Until then, please don’t jump in With Julis Genakowsy (sp) and Holder’s band of merry job killing douchetards.

flashoverride on September 1, 2011 at 3:17 AM

Ed you must be an At&t customer. This deal sucks, and its not really about quality of service but getting rid of unlimited data plans.

snoopicus on September 1, 2011 at 6:44 AM