U.S. looks to block AT&T, T-Mobile merger (Updated)

Both the New York Times and the Associated Press are reporting that the Justice Department is suing to halt the proposed merger of AT&T and T-Mobile, citing serious competitive issues with the US $39 billion deal.

The complaint says "AT&T's elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market, thus, unless this acquisition is enjoined, customers of mobile wireless telecommunications services likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest than would exist absent the merger."

AT&T announced its desire to merge in March, and the proposal has drawn fire from consumer groups, lawmakers, and rivals like Sprint which has been urging the government to stop the merger.

AT&T and Verizon are the sole US sources for the iPhone, but rumors have mentioned Sprint and T-Mobile as possibilities.

Update: AT&T isn't giving up. As Engadget reports, Wayne Watts, AT&T Senior Executive Vice President and General Counsel, issued the following statement:

"We are surprised and disappointed by today's 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. We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court. At the end of the day, we believe facts will guide any final decision and the facts are clear. This merger will:

· Help solve our nation's spectrum exhaust situation and improve wireless service for millions.
· Allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans, or 97% of the population;
· Result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.

We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court."