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

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.