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U.S. Says No to AT&T, T-Mobile Merger

August 31, 2011

The U.S. government sued to block AT&T’s $39 billion deal to buy T-Mobile USA because of anti-competition concerns, launching the biggest challenge to a takeover, Reuters reported.

A failed deal would be expensive for AT&T, which plans to fight the government’s decision in court. It promised to pay a breakup fee worth an estimated $6 billion, including $3 billion in cash, spectrum and a roaming agreement for T-Mobile USA.

The Justice Department, in a lawsuit filed today, said eliminating T-Mobile as a competitor would be disastrous for consumers and would raise prices, particularly because the smaller provider offers low prices, Reuters said.

“Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer,” said Sharis Pozen, acting head of the Justice Department’s antitrust division.

AT&T will fight the decision in court, said company attorney Wayne Watts, who added that the Justice Department had given the company no indication that it was contemplating such a move.

The company has argued the deal would let it add capacity and meet demand for high-speed wireless service.

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