The government?s attempt to block the AT&T, T-Mobile deal could force AT&T to divest spectrum in an attempt to push through the deal.

The Department of Justice filed a lawsuit on Wednesday amid concerns that the removal of T-Mobile from the wireless carrier market could hurt competition, innovation, consumers and raise prices. AT&T will fight the suit in court and could end up having to divest spectrum in order to get the deal approved.

?My view is that it will eventually go through,? said Susan Rudd, director of service provider analysis at Strategy Analytics, Boston. ?I expect the merger to happen right before the election next year.

?This is about AT&T having too much spectrum,? she said."The fact that the U.S. government is looking closely at the deal means that AT&T is going to have to divest spectrum.?

Ms. Rudd expects AT&T to divest analog spectrum and spectrum that it acquired from Alltel that does not fit into its 3G network. However, the company will fight to hold onto all the mobile spectrum it can.

The carrier landscape
AT&T agreed to buy T-Mobile for $39 billion in March 2011. The proposed deal has met with significant opposition, including from wireless carriers and others because of how much spectrum AT&T would own as a result.

The Justice Department?s suit is likely to have an impact on AT&T even if it is unsuccessful because of the spotlight it will shine on AT&T?s activities and the fact that it will drag out the approval process.

?A lot people thought AT&T got too big for their britches,? Ms. Rudd said. ?This shows that AT&T needs to more of team player.?

If the company does end up divesting spectrum, this has the potential to alter the carrier landscape.

In fact, the suit may be good news for Sprint as well as competition in the carrier space. 

?Others like Sprint and Clearwire are happy to see this case because they want to see AT&T divest spectrum,? Ms. Rudd said. ?Sprint could pick up the spectrum AT&T is selling for a low price.?

?It also means we will have at least one or two more major players,? she said.

At the very least, the suit will be a roadblock as any divestitures are given time to take place. This could push the merger past the original deadline, which is March 20, 2012.

Such a delay may not be bad news for Deutsche Telecom, T-Mobile?s parent company, which stands to gain $3 billion in cash, a roaming agreement with AT&T and the transfer of spectrum if the deal goes past the original deadline. 

?T-Mobile benefits from the delay,? Ms. Rudd said. ?Because Deutsche Telecom was concerned about the potential regulatory problems for the deal, it put in some penalty clauses if delays are caused by regulatory issues.?

The proposed merger has already done damage to T-Mobile position in the marketplace and whether or not the deal goes through may not have much of an impact on it in the long run.

?T-Mobile is not in good shape,? Ms. Rudd said. ?The fact that the deal is going through is doing damage to T-Mobile, with customers going to other carriers.

?If the deal falls through, more customers are likely to stay with T-Mobile,? she said. ?However, the damage may already be done.?

One reason the suit is happening at all is that the regulatory environment concerning large-scale deals like this one has grown stricter under the Obama administration, per Ms. Rudd.

?I always thought it was very ambitious to get this through in a year,? Ms. Rudd said.

The deal also needs the approval of the Federal Communications Commission, which has expressed its own concerns over the impact on competition.

AT&T is countering claims that it will own too much spectrum with claims that the deal will help improve broadband access in rural areas. 

?AT&T is promoting the deal as being good for broadband data in rural areas,? Ms. Rudd said. ?If the deal does not go through, it will say this is going to slow 4G growth in rural areas."

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York

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