The Obama administration on Wednesday filed to block AT&T Inc's $39 billion proposed acquisition of T-Mobile USA from Deutsche Telekom due to anti-competitive concerns.
The news sent AT&T shares down more than 3 percent and Deutsche Telekom shares fell nearly 7 percent. Shares of rival Sprint Nextel Corp jumped nearly 10 percent.
Here are some comments on the news:
STEVE CLEMENT, ANALYST AT PACIFIC CREST
It's surprising. Clearly AT&T didn't expect this. AT&T put itself in a position where it would have to pay a hefty break-up fee to T-Mobile USA.
It changes things for them with respect to the spectrum flexibility they'd have. They're going to have to be in the market to buy incremental spectrum.
It's mixed for Sprint. On the one hand, they were potentially going to lose T-Mobile USA as a competitor at the low end of the market. Now it's going to face a T-Mobile that's in a better position prior to the merger proposal, with extra cash and spectrum and a new roaming agreement with AT&T.
It also puts T-Mobile USA back in play as a potential merger candidate for Sprint.
JAMES COLE, U.S. DEPUTY ATTORNEY GENERAL
The Department filed its lawsuit because we believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services.
Right now, four nationwide providers account for more than 90 percent of the mobile wireless connections in America, and preserving competition among them is crucial. For instance, AT&T and T-Mobile currently compete head-to-head in 97 of the nation's largest 100 cellular marketing areas. They also compete nationwide to attract business and government customers.
Were the merger to proceed, there would only be three providers with 90 percent of the market, and competition among the remaining competitors on all dimensions-including price, quality, and innovation-would be diminished.
MARK JAMES, ANALYST AT LIBERUM CAPITAL, VIA EMAIL
Understandably this is being taken negatively, but can it really come as a surprise? We retain the view...that regulatory approval will be a long, drawn out process given market shares of the combo will reach 41 percent. Ultimately, post concessions, we still expect the deal to be cleared -- eventually.
Those more bullish than us on DT can draw SOME comfort from the deal break clause. AT&T is on the hook for US$3 billion should the deal falter.
We remain Sellers of Deutsche Telekom where domestic operations are firmly in reverse. Post deal announcement our concerns were that all the good news was arguably in the price, leaving investors to fret over deal risk and contend with the poor domestic trends.
HAROLD FELD, LEGAL DIRECTOR AT PUBLIC KNOWLEDGE
Fighting this job-killing merger is the best Labor Day present anyone can give the American people. AT&T's effort to recreate 'Ma Cell' by holding rural broadband hostage and threatening American jobs deserves nothing but scorn.
The FCC should move as quickly as possible to follow the lead of the Department of Justice and reject the merger.
Andrew Schwartzman, Media Access Project Senior Vice President and Policy Director
This is arguably the most anti-competitive move in recent American economic history. It is heartening that the Department of Justice has withstood withering political pressure from AT&T to do the right thing for the American public.
JACK GOLD, PRINCIPAL AT J. GOLD ASSOCIATES
I continue to believe that reducing the number of companies providing service will stifle competition and ultimately hurt consumers.
AT&T swallowing T-Mobile will essentially result in the U.S. becoming a duopoly with AT&T and Verizon Wireless controlling the vast majority of the market. It will hurt Sprint, and certainly many of the smaller players.
And since it's astronomically expensive to start a mobile carrier these days, it's unlikely that any new competitors will arise unless a big international funding group steps in -- perhaps from China -- which is unlikely to win approval politically.
So the bottom line for me is that even though AT&T certainly would benefit from the increased spectrum available from the T-Mobile acquisition, it may not be in the best interest of the consumer ultimately.
On the flip side of course, it may be impossible for T-Mobile to remain an independent player longer term, so an acquisition by AT&T might be in its best business interest. But if T-Mobile goes, it will put incredible pressure on Sprint to find a big brother as well.
ANDREW HOGLEY, TELECOMS ANALYST AT ESPIRITO SANTO
The momentum had been building on the positive case. A lot of state governors, attorneys-general had been coming out in support of the case. AT&T had been lobbying on creating 5,000 more U.S. jobs, guaranteeing no more call center redundancies.
We thought the weight of AT&T's lobbying was having some success; this very much undermines that. It's very uncertain where this leaves us at the moment. The stock price reaction is probably a little bit overdone today but it's still clearly a negative development, given the commentary we'd seen so far.
REBECCA ARBOGAST AND DAVID KAUT AT STIFEL NICOLAUS IN
Based on our quick review of the complaint, we believe the filing is serious and not meant as merely a negotiating strategy to bring AT&T to the table to negotiate conditions and concessions.
We expect that AT&T will fight, rather than merely step down as is more common when DOJ moves to block mergers.
DOJ does not need to seek a preliminary injunction (which has a higher burden of proof) because the companies cannot close while the case is still pending at the FCC. We would be astonished if the FCC were to approve the deal while litigation is pending before the District Court.
If approval is not provided by September 2012, we understand that AT&T is required to make the breakup payment to T-Mobile.
(Reporting by Sinead Carew in New York, Kate Holton and Georgina Prodhan in London, Karey Wutkowski and Jasmin Melvin in Washington, and Bill Rigby in Seattle; compiled by Tiffany Wu)