Justice Department sues to block AT&T-T-Mobile USA merger

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The U.S. Justice Department has sued to block AT&T's (NYSE: T) proposed $39 billion purchase of rival T-Mobile USA, arguing the purchase would hurt competition in the wireless market.

The government filed a complaint in federal court and is seeking a declaration that AT&T's proposed purchase would violate U.S. anti-trust law. The Justice Department also asked for a court order blocking any arrangement implementing the deal.

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

In a statement, AT&T General Counsel Wayne Watts said the company was blindsided by the lawsuit, and that AT&T is "surprised and disappointed" by the Justice Department's action.

"We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed," he said. "The DOJ has the burden of proving alleged anticompetitive affects and we intend to vigorously contest this matter in court."

Watts reiterated that the deal will help improve wireless service for millions of customers, ease AT&T's spectrum crunch, bring 4G services to 97 percent of all Americans, and lead to billions of dollars in additional U.S. investment and thousands of jobs.

Both the Federal Communications Commission and the Justice Department need to approve the deal for it to be finalized.

The FCC is conducting a review on market competition and the Justice Department's review has largely centered on antitrust and anticompetitive issues.

AT&T's proposed deal would create the largest U.S. operator, and the company has argued that the combination of AT&T and T-Mobile will drive down wireless pricing and create new jobs. AT&T also faces $3 billion cash break-up fee it will have to pay T-Mobile parent Deutsche Telekom if the deal falls through.

The Justice Department's move doesn't kill the deal, but may require AT&T to significantly rework the purchase given that it faces a hefty cancellation fee.

For more:
- see this Bloomberg article
- see this release at RTTNews

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