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Experts say AT&T’s merger with T-Mobile might yet survive

by Phil Hornshaw

AT&T’s $39 billion bid to merge with T-Mobile is in dire straits, facing a lawsuit from the Department of Justice that seeks to block it for fear that it will cut competition among cellular providers.

But that doesn’t mean the deal is dead in the water, some experts contend, according to a story from PCWorld.

The Justice Department said in its lawsuit that as it stands, the AT&T/T-Mobile merger will significantly decrease competition in the cellular industry, but it also mentioned in its filing that it would be open to a reworked deal that would alleviate those concerns, according to the Wall Street Journal.

Here’s a quote from PCWorld’s story:

But the DOJ's 25-page antitrust complaint filed in U.S. District Court for the District of Columbia reads more like a move toward a settlement than a document leading to a trial, said David Balto, an antitrust attorney and former policy director at the U.S. Federal Trade Commission. ‘A lawsuit doesn't mean a trial,’ said Balto, who has supported the merger.

The DOJ's lawsuit is ‘really a negotiating ploy to really put themselves in a stronger position to negotiate a consent decree,’ he added ‘This isn't a case that can't be fixed.’

AT&T has said that it is willing to make concessions and sell off assets – rumored to be as much as $8 billion – to make the merger go through. It also has said that it intends to fight the lawsuit in court, and that it believes “the facts will prevail,” according to a press release the company put out in response to the lawsuit. AT&T has said that the merger is necessary for it to expand its network to 97 percent of the U.S. population, although leaked filings with the Federal Communication Commission suggest AT&T could expand its network by investing far less to build it out.

The door is still open for AT&T to potentially settle with the DOJ, but if it doesn’t, experts expect the trial to happen as early as by the end of the year. While AT&T wants to expedite the process, the trial could drag on for quite a while, and even if it loses, the DOJ could appeal the case and extend it even further.

PCWorld reports that in AT&T has agreed to pay a “breakup fee” of $3 billion and bandwidth spectrum if the deal isn’t complete by September 2012. What AT&T is really after is T-Mobile’s chunk of electromagnetic spectrum, PCWorld reports, so it could restructure the company to keep the bandwidth while spinning T-Mobile off into a separate company.

But just what the DOJ might go for, or what AT&T is willing to do to change the deal, isn’t exactly clear. We’ll have to see if the case ever makes it to trial, or if AT&T looks for a different way to alleviate the government’s concerns.