The U.S. Justice Department sued to block AT&T's merger with T-Mobile, while Samsung looks to strengthen its position in the industry.
AT&T Merger Hits Major Snag
The U.S. Justice Department sued AT&T's pending $39 billion merger with T-Mobile, arguing it would violate antitrust law and "substantially lessen competition" in the wireless market. If the FCC follows the DoJ's recommendation to scuttle the deal, AT&T will have to pay $6 billion in cash and assets to T-Mobile owner Deutsche Telekom.
AT&T, however, is determined not to lose without a fight and is preparing a two-track plan to prevent a lengthy court battle. The company is reportedly confident it can settle with Justice Department by agreeing to sell competitors one-quarter of T-Mobile plus maintain the carrier's low subscription costs.
Unfortunately for AT&T, President Obama's administration may be using the deal to demonstrate the government is tough on antitrust violations. Obama vowed to crack down on deals that undermine competition when he took office, and the merger is a major opportunity to capitalize on that promise.
The government's new suit against AT&T may affect the Federal Communication Commission's timetable to reach a decision on the merger. The regulatory body may have to stop the clock on its 180-day review period while it waits for the DoJ to conclude legal proceedings.
Sprint, which has publicly protested the merger, rejoiced at its rival's latest setback. The company's senior vice president said, "Sprint applauds the DoJ for conducting a careful and thorough review and for reaching a just decision -- one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry."
