When AT&T (NYSE:T) and T-Mobile (OTCQX:DTEGY) announced plans to merge operations the news rocked the cell phone world. Could it actually be possible that consolidation would happen in an industry that has so much regulation? It appears that the U.S. Justice Department has those exact concerns.
The agency filed filed a complaint Wednesday, August 31st, for the purpose of blocking AT&T's $39 billion acquisition of T-Mobile. Should this deal gain approval it will make AT&T the largest cell phone provider in the U.S. The U.S. District Court for the District of Columbia received the complaint.
Citing that such a transaction would impact consumers, the Justice Department feels that T-Mobile creates and fosters "competitive pressure on its three larger rivals, particularly in terms of pricing, a critically important aspect of competition."
"AT&T's elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market. Thus, unless this acquisition is enjoined, customers of mobile wireless telecommunications services likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest than would exist absent the merger."
Verizon (NYSE:VZ) and Sprint (NYSE:S) are competitors in the space that would also be impacted. AT&T made huge strides with an exclusive iPhone deal with Apple. That exclusive deal no longer exists, with iPhones now being available on Verizon and rumored to be coming to Sprint. If Sprint does get the Phone, T-Mobile may be the lone man out, and will have to be in catch-up mode.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.