AT&T Lawsuit Might Have Broader Implications

The lawsuit seeking to block AT&T’s takeover of T-Mobile USA shows a more aggressive antitrust stance by the U.S. Justice Department that limits prospects for other big telecommunications deals, antitrust analysts said.

Translation: It might not be possible for Sprint to merge with T-Mobile USA, or Verizon Wireless to buy Sprint, either.

That doesn't mean, in hindsight, that such a policy is always an optimal approach long-term. Think back to June 2000, when WorldCom wanted to acquire Sprint, a $152 billion deal. That combination of two long-distance concerns was seen to have undesirable anti-competitive concerns.

WorldCom went bankrupt and Sprint no longer is primarily a long-distance company. Would that merger have done much other than delay WorldCom's collapse? Probably not.

The point is that markets change. Long distance has for all intents and purposes disappeared as a discrete business for most providers of communications services, with the exception of small specialists such as Skype, which have huge traffic, but relatively small revenue. At least for the moment, though, some observers think the Department of Justice objection might make any significant mergers among the biggest four providers impossible.

Henry Levine, a partner at Washington-based law firm Levine, Blaszak, Block & Boothby LLP, which represents large companies in telecommunications cases.

“It’s a line in the sand,” he said. The suit signals “you cannot buy one of the major players in the market,” he said. A merger between number three wireless carrier and number-four T-Mobile might raise similar competition concerns, Levine said.

AT&T Lawsuit Marks U.S. ‘Line in the Sand’ for Telecoms - Bloomberg: