What The Justice Department’s Slapdown Of AT&T Really Means

The Justice Department’s decision to sue AT&T over its proposed acquisition of T-Mobile is an unusual step and one that is likely to prove fatal for the merger. Here’s a short account of what the lawsuit means and what options AT&T (NYSE: T) has left going forward.

»  Why did the DOJ sue? Shortly after the merger was announced, the government said it would investigate the deal. Typically, this leads to negotiations in which the company offers to take steps to ensure the deal will not be anti-competitive. The fact the government is now going to court means negotiation have broken down, according to Andre Barlow, a Washington anti-trust lawyer.

»  How does this relate to the FCC? The broadcast regulator is in the course of deciding whether it will allow the transfer of spectrum licenses to AT&T. It will now effectively halt that process until the anti-trust issues with the Justice Department are resolved.

»  What are AT&T’s options? AT&T can do one of three things: it can fold its cards, go to court, or try to reach a settlement by offering new concessions to the government.

»  What is likely to happen next? A settlement is unlikely, says Barlow, because there are few concessions that would satisfy the Justice Department at this point. It probably doesn’t help that a law firm earlier this month accidentally posted a document from AT&T suggesting it wants to acquire T-Mobile to crush Sprint (NYSE: S) and reduce competition.

»  So it’s off to court, then? Not necessarily. Going to court is slow-going and AT&T has a tough case to make. Even if it succeeds, AT&T would still have to get approval from the FCC. At this point, the company may just want to lick its wounds and go home.

»  Is the government becoming more aggressive on anti-trust enforcement? While the Obama administration initially took a low profile on anti-trust issues, it has become much more aggressive. It has filed at least three lawsuits this year to stop mergers between frozen food purveyors, credit card processors and tax software firms. The first two cases have settled.