The lawsuit seeking to block AT&T Inc’s takeover of T-Mobile USA Inc shows a more aggressive antitrust stance by the US justice department that limits prospects for other big telecommunications deals, antitrust analysts said.
The suit, filed yesterday in a federal court here, seeks to derail the $39-billion T-Mobile deal, the biggest acquisition announced this year, according to data compiled by Bloomberg. The last transaction the justice department challenged whose size even approached the AT&T bid was the $8.4-billion Oracle Corp-PeopleSoft Inc merger in 2003.
The T-Mobile deal is the biggest challenged by the justice department since it sued in June 2000 to block WorldCom Inc’s proposed acquisition of Sprint Corp, a deal valued at $152 billion when the companies called off the merger the following month.
With yesterday’s filing, President Barack Obama’s justice department departed from its strategy of approving large acquisitions after adding conditions, as it did with Comcast Corp’s purchase of NBC Universal and Ticketmaster Entertainment Inc’s merger with Live Nation Inc. Previously, antitrust authorities at the department “backed down,” said Robert Lande, a University of Baltimore law professor.
“They negotiated a compromise,” Lande said. “But this one they said, ‘No, we cannot compromise, this is anticompetitive.’”
‘ANTICOMPETITIVE’
AT&T intends to fight the litigation, Wayne Watts, the Dallas-based company’s general counsel, said in a statement yesterday. Bonn, Germany-based Deutsche Telekom AG, which owns T-Mobile, also said it would contest the suit.
The justice department said in its complaint a combination of AT&T and Bellevue, Washington-based T-Mobile would result in “higher prices, poorer quality services, fewer choices and fewer innovative products” for consumers.
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“Any way you look at this transaction, it is anticompetitive,” Sharis Pozen, the acting head of the department’s antitrust division, said at a news conference yesterday.
That position would make it harder for companies to make a case with regulators for large, complex mergers in the telecommunications industry, said Henry Levine, a partner at Washington-based law firm Levine, Blaszak, Block & Boothby LLP, which represents large companies in telecommunications cases.
LINE IN SAND
“It’s a line in the sand,” he said. The suit signals “you cannot buy one of the major players in the market,” he said. A merger between No 3 wireless carrier Sprint Nextel Corp (S) and No 4 T-Mobile might raise similar competition concerns, Levine said. Still, the suit doesn’t signal the justice department would oppose smaller acquisitions, he said.
The AT&T challenge isn’t a harbinger of the fate of Express Scripts Inc’s $29-billion offer for Medco Health Solutions Inc, announced in July, said Marc Schildkraut, an antitrust lawyer with Dewey & LeBoeuf LLP in Washington. That transaction, which would create the biggest U.S. pharmacy- benefits manager, is being reviewed by the Federal Trade Commission, not the justice department.
“Medco is a very hard deal but I don’t think there’s a relationship between the two,” he said. “It’s a totally different deal and a total different agency.”
By buying T-Mobile, AT&T would displace Verizon Wireless, which is owned by Verizon Communications Inc and Vodafone Group Plc, as the largest US wireless carrier. Sprint would remain the third-largest.