Justice Dept. sues to block AT&T's purchase of T-Mobile

The U.S. govement has hung up on AT&T's deal to buy T-Mobile.

The Justice Department yesterday filed a lawsuit to block the proposed takeover - which would make AT&T the No. 1 wireless carrier in the country - on the grounds the $39 billion deal would lessen competition and raise prices for consumers.

The merger \"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,\" said U.S. Deputy Attoey General James Cole.

The deal would leave only three competitors with 90% control of the market, Cole said.

AT&T said the govement's move came out of the blue, and the company vowed to fight the challenge in court.

Merging AT&T, the second-largest carrier, with T-Mobile, the No. 4 carrier, would have catapulted AT&T ahead of Verizon Wireless, the current market leader.

Sprint Nextel, which has long opposed the deal, would retain its No. 3 ranking - but be a distant third in what would amount to a two-horse race between AT&T and Verizon.

\"The DOJ today delivered a decisive victory for consumers, competition and our country,\" Sprint said in a statement.

\"By filing suit to block AT&T's proposed takeover of T-Mobile, the DOJ has put consumers' interests first.\"

AT&T, which announced plans for the acquisition in March, had claimed its purchase of T-Mobile USA from parent company Deutsche Telekom would actually lower prices and increase service in major U.S. markets.

The deal falling through would be a costly blow for AT&T, which promised to pay a breakup fee worth an estimated $6 billion, including $3 billion in cash to Deutsche Telekom. AT&T would also provide wireless spectrum and a roaming agreement for T-Mobile.

AT&T will lose out on the hefty cost savings it was hoping to get out of the deal, Pacific Crest Securities analyst Steve Clement told the Daily News. Plus, \"it means incremental investment either in spectrum or capital to deal with their growth longer term.\"

In a statement, AT&T general counsel Wayne Watts said the company was \"surprised and disappointed by \[the\] 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 seems to have been blindsided. A few hours before details of the lawsuit were made public, the company had issued a press release crowing that the merger would result in 5,000 call center jobs outsourced to other countries being brought back to the U.S. - \"the largest commitment by an individual American company to bring jobs back to the U.S. since the economic crisis began in 2008,\" the statement said.