Washington – The U.S. Justice Department on Wednesday sued to block AT&T's bid to acquire T-Mobile USA, saying the proposed merger would reduce competition and raise prices.
In a complaint filed in federal court in Washington to block the $39 billion deal, the Justice Department said the potential tie-up should be considered a violation of antitrust law.
The merger agreement, announced in March, has sparked opposition from consumer groups and other cellular phone companies, which have cited the difficulty of competing against such a giant wireless carrier.
AT&T is the United States' No. 2 mobile phone operator by number of subscribers, while T-Mobile is the fourth-biggest.
"We feel the combination of AT&T and T-Mobile would result in tens of millions of consumers across the U.S. facing higher prices, fewer choices, and lower quality products for wireless services," Deputy Attorney General James Cole told a press conference.
"This lawsuit seeks to ensure that everyone can continue to reap the benefits" of competition among wireless providers, he said.
The Justice Department's decision, which comes before the Federal Communications Commission has completed its review of the merger, casts doubt on T-Mobile's future in the United States, where that unit of Germany's Deutsche Telekom AG has had trouble competing against bigger rivals.
AT&T earned total revenue of more than $124 billion in 2010, with wireless revenue accounting for $53.5 billion of that total.
T-Mobile, which has roughly 33.6 million subscribers in the United States, earned $18.7 billion in mobile revenue in 2010.
AT&T was quick to respond to the announcement from Washington.
"We are surprised and disappointed by today's action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated," AT&T General Counsel Wayne Watts said in a statement.
The proposed merger would improve service for millions of customers, allow AT&T to expand its 4G network to 97 percent of the U.S. population and create "tens of thousands of jobs, at a time when our nation needs them most," he said.
"We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court," Watts said.
A merged AT&T/T-Mobile would be the mobile telephony leader in the United States with 130 million subscribers, and in combination with Verizon Wireless would control 80 percent of the market.
Shares of AT&T - one of 30 companies that make up the Dow Jones Industrial Average - had fallen 4.25 percent near the end of Wednesday's trading on the New York Stock Exchange.