AT&T on Friday responded to a Department of Justice lawsuit that seeks to block the carrier's acquisition of T-Mobile, arguing that competition in the wireless space will actually suffer without a combined AT&T and T-Mobile, and that the DOJ has not "come to grips" to the efficiencies the deal will produce.
In a separate statement, AT&T said it is still "interested in a solution that addresses the DOJ's issues with the T-Mobile merger," but said any discussions with the agency will remain confidential.
Last Wednesday, the DOJ sued to block the $39 billion deal in a Washington, D.C. federal court, claiming that combining the two wireless companies will "substantially lessen competition" in the market. Ultimately, the agency wants the court to find that AT&T purchasing T-Mobile would violate U.S. antitrust laws and hand down a court order blocking the deal.
Not surprisingly, AT&T had a different take. In its Friday response, the carrier said buying T-Mobile will result in "increased output, higher quality service, fewer dropped calls, and lower prices to consumers than without the merger." Rather than lessen competition, AT&T said, "the combined firm will usher in more intense competition to an already vibrantly competitive market."
AT&T echoed what Philipp Humm, president and CEO of T-Mobile USA, told a Senate Committee in May: T-Mobile is a goner without AT&T.
"Although the transaction will remove T-Mobile as an independent competitor, no significant consumer harm will result," AT&T said in its filing, pointing to the firm's dwindling subscriber base and the fact that it's "stuck in the middle" between larger rivals like Sprint and Verizon and smaller firms like MetroPCS and Cricket.
"The Department does not and cannot explain how, in the face of all of these aggressive rivals, the combined AT&T/T-Mobile will have any ability or incentive to restrict output, raise prices, or slow innovation," AT&T said. "Nor can it explain how T-Mobile, the only major carrier to have actually lost subscribers in a robustly growing market, provides a unique competitive constraint on AT&T."
Furthermore, AT&T said the the DOJ:
- Has not come to grips with the significant efficiencies this transaction will generate.
- Fails to depict accurately the state of competition in mobile telecommunications today the dynamic nature of the wireless industry, or the procompetitive and pro-consumer impact of this transaction.
- Largely ignores the significant competition from established providers such as Verizon Wireless and Sprint, innovative upstarts such as MetroPCS and Leap/Cricket, and strong regional providers like US Cellular and Cellular South, among others.
- Fails to acknowledge that surging customer demand for wireless services drives carriers to invest, expand, and innovate.
AT&T reiterated that buying T-Mobile will help it solve the spectrum crunch. AT&T invested more than $30 billion between 2008 and 2010 in wireless spectrum, "yet customers' insatiable and growing demand for wireless data is placing unprecedented strains on AT&T's network and is impairing its ability to continue to meet explosive mobile broadband demands."
AT&T basically argued that the DOJ's lawsuit will do more harm to wireless competition than the T-Mobile deal. Blocking the merger "will severely set back growth and competition in the wireless industry. Without this merger, AT&T will continue to experience capacity constraints, millions of customers will be deprived of faster and higher quality service, and innovation and infrastructure will be stunted," AT&T argued. "If this transaction does not close due to Plaintiff's lawsuit, wireless consumers will, as the FCC Chairman predicts, increasingly face higher prices and lower quality."
Earlier this week, the judge presiding over the DOJ case scheduled a status hearing for September 21. Rival Sprint is also suing to block the merger. In a Friday statement, a Sprint spokesman said "AT&T's court filing does not change the facts. This proposed takeover would create a clear wireless duopoly that could raise prices, stifle innovation and cost American jobs."
For more, see On AT&T/T-Mobile Merger, Justice is Served as well as 7 Alternative Buyers for T-Mobile.