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Court fight called firm’s only recourse

AT&T, US talks seen not helping in T-Mobile bid

If the deal falls apart, AT&T would owe T-Mobile’s parent fees worth up to $7 billion. If the deal falls apart, AT&T would owe T-Mobile’s parent fees worth up to $7 billion. (Danny Moloshok/Reuters)
By Tom Schoenberg, Sara Forden, and Jeff Bliss
Bloomberg News / September 2, 2011

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WASHINGTON -AT&T Inc. wouldn’t have much luck trying to salvage its proposed $39 billion takeover of T-Mobile USA Inc. through negotiation with the Justice Department, leaving a court fight as its only recourse, lawyers said.

The combination of the country’s second- and fourth-largest wireless carriers would violate antitrust law and “substantially lessen competition,’’ the United States said in a lawsuit filed Wednesday in federal court in Washington. The Justice Department asked US District Judge Ellen Segal Huvelle to block the deal, the largest announced acquisition of the year, according to data compiled by Bloomberg.

AT&T chief executive Randall Stephenson in March disclosed the proposed purchase of Bellevue, Wash.-based T- Mobile, a unit of Deutsche Telekom AG. If the transaction falls apart, Dallas-based AT&T would owe the German carrier a breakup fee and concessions worth up to $7 billion.

“Given the size of the cancellation fee that was negotiated into this agreement, AT&T has the incentive to fight,’’ said Andrew Gavil, who teaches antitrust law at Howard University in Washington. “The fact that the Justice Department is challenging the deal doesn’t mean they won’t negotiate a resolution at some point.’’

Rejection by regulators would leave AT&T liable to pay Deutsche Telekom $3 billion in cash, to give T-Mobile USA wireless spectrum, and to reduce charges for calls into AT&T’s network, a package valued at up to $7 billion, Deutsche Telekom has said.

AT&T shares fell 21 cents to $28.27. Bonn-based Deutsche Telekom’s American depositary receipts declined 2 cents to $12.76. Each ADR represents one share.

AT&T said Wednesday that it was surprised by the government’s lawsuit and that it will ask for an expedited hearing.

“We have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated,’’ Wayne Watts, AT&T’s general counsel, said in a statement. He said the company intends to fight the litigation. Deutsche Telekom said it too would contest the suit.

Huvelle has ruled against Justice in antitrust matters before. In 2001, the judge allowed SunGard Data Systems Inc. to acquire Comdisco Inc.’s disaster recovery business for $825 million, rejecting US arguments that the deal would hurt competition.