U.S. News

Hurdle High for Approving AT&T Merger: Justice Department

It's going to be tough for AT&T to convince regulators that it should be allowed to go through with its $39 billion plan to acquire T-Mobile.

Etienne Franchi | AFP | Getty Image

Although the Justice Department said its door is open for counter-proposals from AT&T , a high ranking official from the department said on Wednesday there's a "pretty high hurdle" for approving the merger.

"When we say there's a problem in 97 markets, we mean 97 markets," the official said referring to the Justice Department's contention that AT&T and T-Mobile currently compete head-to-head in 97 of the nation’s largest 100 cellular marketing areas.

Still, the official said, "there are ways in which companies can slice and dice the assets they have" to bring them into antitrust compliance.

So what would it take to get the government to sign off on the deal?

"We need to see some package of divestitures and restructuring that would yield the same result" that is in the marketplace now, the official said.

That is, the Justice Department wants to see a result that doesn't change the way the market has operated with an aggressive and independent T-Mobile competing with AT&T. Structuring a merger that would not change the competitive landscape at all seems extremely difficult.

That means this fight is probably going to play out in the courts.

AT&T has said that they will vigorously contest today's decision.

"We are surprised and disappointed by today’s action," said Wayne Watts, AT&T's Senior Executive Vice President and General Counsel. "We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed."

The Justice Department also wants to go to trial as soon as possible—"this winter or spring," the official said.

The reason, the official said, is that the department doesn't think that consumers are being well served while the deal is pending because it crimps T-Mobile's ability to compete aggressively with a company that is trying to acquire it.

The official pointed to aggressive market moves by T-Mobile before the merger talk that worried executives at AT&T.

"It's that type of more competitive, aggressive behavior that we want to preserve in the marketplace," the official said.

"Right now, they're quasi-partners," the official said of T-Mobile's relationship with AT&T. And for T-Mobile, that means "they lose their edge."