The United States Department of Justice has filed an antitrust lawsuit to block AT&T's $39 billion takeover of cellular telephone giant T-Mobile. AT&T contends that a merger between the two companies will improve service to more parts of the country. AT&T is the second-largest cell phone company in the United States, and T-Mobile is the fourth-largest.

In its antitrust complaint, the Department of Justice argues that the merger would remove T-Mobile as a competitor in the market and reduce pressure on other providers to keep their prices low and improve service for consumers. The DOJ maintains that consumers, especially those in rural areas, benefit greatly from competition among these providers.

An AT&T spokesperson says the company was "surprised and disappointed" by the antitrust complaint and plans to continue pressing to make the deal work. AT&T's lead counsel expressed that the merger would allow AT&T to extend its services to 97 percent of the United States and is in the best interest of consumers.

Also opposing the merger is competitor Sprint Nextel Corp. Sprint, the nation's third largest mobile provider, potentially stands to lose the most if the merger goes through.

The Department of Justice has invited AT&T to propose remedies to the antitrust issues, opening the door to a possible settlement. As part of the agreement, AT&T could have to pay T-Mobile $6 billion if the deal fails regulatory review.

The Federal Communications Commission is also reviewing the proposed merger and has indicated that it will not undermine the U.S. Department of Justice in its process. Historically, the FCC has never approved a merger that has been rejected by the U.S. Department of Justice.

Source: The Wall Street Journal, "Justice Department Sues to Block AT&T's Takeover of T-Mobile," Thomas Katan and Brent Kendall, Aug. 31, 2011