The U.S. Department of Justice filed a complaint Wednesday opposing AT&T's $39 billion merger with T-Mobile, saying the deal would substantially lessen competition in the mobile telephone sector.

In March, AT&T agreed to acquire Deutsche Telekom's U.S. unit, T-Mobile, for about $39 billion in stock. AT&T, with about 98.6 million connections to mobile wireless devices, and T-Mobile, with approximately 33.6 million connections, serve customers throughout the United States, reaching the homes of at least 90 percent of the U.S. population.

AT&T's elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market, the DoJ stated in its complaint.

The complaint said that unless this acquisition is enjoined, customers of mobile wireless telecommunications services will likely face higher prices, less product variety and innovation and poorer quality services.

While AT&T's challenge might be more challenging, it is incentivized by a large breakup fee of $3 billion in cash, spectrum that we estimate is worth at least $1 billion and a data roaming agreement, BTIG analyst Walter Piecyk wrote in a blog post.

Of course, AT&T could still work out a settlement with DOJ, but the body language from Deputy Attorney General James Cole at the press conference seemed a bit aggressive, Piecyk wrote.

At a minimum, the expected timeline to closing or termination has likely been pushed out from the first quarter of 2012, but since the DOJ filed its complaint so quickly, AT&T could navigate the courts for a DOJ resolution by as early as mid-2012.

The analyst outlines the impact of the recent development on Sprint, the third-largest carrier in the U.S.

Sprint had been in discussions with T-Mobile USA over a potential network sharing deal when AT&T made its surprise bid. 

T-Mobile's primary competitors are Sprint and Metro PCS, not Verizon, and a Sprint/T-Mobile deal was never a sure thing.  If T-Mobile remained independent, it would likely result in increased competition for Sprint and Metro PCS. 

Sprint CEO Dan Hesse has lobbied aggressively against this deal likely because of his own desire for a deal with T-Mobile rather than a genuine concern about competition, the analyst said.

The initial reaction to the government's intervention for Sprint's stock was positive as its shares rose 21 cents, or six percent, to close Wednesday's trading at $3.76.

A bumpier approval process could also instigate T-Mobile to be more price-aggressive in the interim as the uncertainty of an approval will be making maintaining the customer base more important, Piecyk added.

The issue is not likely to be resolved anytime soon, and Sprint needs to move forward with the already delayed Network Vision and 4G plans. 

Given AT&T's plans to continue to fight to close this deal, Sprint would not likely be able to cut a deal with T-Mobile until the second half of 2012. We believe that investors should not assume that T-Mobile would automatically want to cut a deal with Sprint, the analyst said.

T-Mobile has more fiber to their cell sites than Sprint and their HSPA+ coverage of 200 million already tops Sprint's 4G coverage. 

T-Mobile has told us that a network sharing deal with Sprint would have been complex and that they had other strategic options, Piecyk added.

AT&T, based in Dallas, Texas, is the second-largest mobile wireless telecommunications services provider in the United States. AT&T provides mobile wireless services in 50 states, the District of Columbia, and Puerto Rico, providing about 98.6 million connections to mobile wireless devices. In 2010, AT&T's revenues from mobile wireless telecommunications services were $53.5 billion, and its total revenues were more than $124 billion.

T-Mobile, with headquarters in Bellevue, Wash., is the fourth-largest wireless carrier in the United States. T-Mobile provides mobile wireless telecommunications services in 48 states, the District of Columbia, and Puerto Rico, providing about 33.6 million connections to mobile wireless devices. In 2010, T-Mobile's revenues from mobile wireless telecommunications services touched $18.7 billion.