In ads that ran in major papers this starting on Thursday, AT&T claims T-Mobile drops twice as many calls and has 50 percent slower download speeds. The ads, AT&T says, are a response to T-Mobile’s years of attack ads rather than any one particular spot.

“T-Mobile’s advertising is a combination of being misguided and just plain wrong,” AT&T said in a statement. “This is just a friendly reminder of the fact that independent third-party testing says AT&T’s network delivers faster speeds and fewer dropped calls than them.”

T-Mobile says that AT&T’s move shows it has found a sore spot.

“Looks like we struck a chord,” CMO Mike Sievert said in a statement. “AT&T doth protest too much. Glad they’re spending their money to print our name.”

And, of course, it wasn’t so long ago that AT&T was trying to buy the company whose network it is now is attacking.

The company kicked off 2012 by announcing six new Android devices, all running on LTE, as well as new LTE-capable Windows phones from HTC and Nokia.

Moments after he left the stage, AT&T Mobility CEO Ralph de la Vega sat down with AllThingsD to talk about a wide range of issues facing his company, various mobile device makers and the industry as a whole.

Here’s an edited look at what he had to say.

On the failure of the T-Mobile deal and where AT&T goes from here:

We’re very pleased that the FCC approved our purchase of the Qualcomm spectrum. We’ll be working to put that into play as quickly as possible. And we are always going to be on the lookout for new spectrum that comes on the market. We hope that the FCC also makes more spectrum available.

We’ve put that behind us and we are moving on to have a great 2012.

On BlackBerry maker Research In Motion, which was notably missing from AT&T’s announcement on Monday:

BlackBerry has got some interesting things coming up. I’m encouraged by some of the things that I understand they are bringing to market.

BlackBerry has been a great partner and, you know, people love their devices. They love the keyboards. I think they are working on all of the things customers want. I am very pleased with, at least, the things that are on their roadmap. As soon as they can get them I think they are going to have a lot of customers knocking on their door.

On Motorola, which was also absent from AT&T’s Vegas announcements:

They are going to have some exciting stuff. They are just not ready to announce them with us. It’s really early in the year.

On Sony’s future in the smartphone market:

As you know, they bought out the Ericsson interest. I think they are going to have a more focused approach and put what I call more “Sony-ness” into their smartphones. We’ve met with their team and I am very encouraged.

On whether AT&T will offer fewer tablets this year after so many iPad rivals failed to make a dent in the market:

I think you are going to see us find models that have a particular differentiated approach to the tablet market. Obviously Apple sets the bar with the iPad, so Pantech is now looking at a very low-end device, still a great device, but I think that kind of distinction is what customers want.

On why the 5.3-inch Samsung Galaxy Note might stand a chance:

That’s the first hybrid device that tries to fill in a niche between a tablet and a smartphone. I’ve been using that device and it is, surprisingly, an amazing device. I didn’t understand whether we were going to be able to make that transition work, but you ought to try it. I think you will get hooked on it.

I think it is for somebody that wants to make it their primary device and doesn’t want to carry around a tablet as well. It’s surprisingly thin. It fits in your pocket.

That’s an iconic device. It’s exclusive to us. We’re going to put a lot of marketing effort behind it.

On whether we will see LTE phones that work across multiple carriers even though the first devices don’t support that.

The first ones are done that way because of technology limitations. How many antennas can you squeeze into one of those things? It’s the first generation. As the technology matures, you will incorporate more bands into the devices. I think you will have as many bands as customers are going to want. It’s not inexpensive, but I think technology will allow us to do that at a reasonable price.

In a statement, AT&T said it had made the move after consulting with T-Mobile parent Deutsche Telekom, and criticized the actions that forced it to abandon the deal.

“The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage,” AT&T said. “In the absence of such steps, customers will be harmed and needed investment will be stifled.”

In addition to federal regulators, Sprint had vehemently opposed the deal, as had other smaller competitors and public interest groups, arguing it would hurt competition.

AT&T will have to pay a giant breakup fee to Deutsche Telekom, as well as enter into an expanded roaming agreement. AT&T said it would take a $4 billion charge in the fourth quarter to account for the cash and spectrum owed to the German telecommunications firm. The charge reflects $3 billion in cash and the $1 billion book value of spectrum owed, though many have placed the value of the spectrum at far more than its book value.

Despite the windfall, the move still leaves Deutsche Telekom without an exit plan for its U.S. holdings, and leaves T-Mobile without a clear path to offer higher-speed LTE service.

AT&T announced its plans to acquire T-Mobile back in March, on the eve of the CTIA trade show in Orlando. It drew almost immediate opposition from Sprint. The headwinds grew stronger as regulators began considering the deal and its potential impact on competition.

The companies had sought to see if there might be a way to offer concessions, but opponents seemed against any combination of the two, dimming the prospects for satisfactory concessions.

AT&T also failed on the political side, in addition to its regulatory chess moves. The company sought to withdraw its FCC application in hope of waiting for a court to rule on the Justice Department’s move to block the deal. However, the court in that case decided that with no FCC application pending it had no need to move quickly.

The two companies on Monday filed a joint motion to stay their pending federal court case until at least January. The move clearly wasn’t AT&T’s idea, however. The Justice Department said last week it would seek a stay in the case given that AT&T had pulled its paperwork with the Federal Communications Commission.

“If approved by the court, all pretrial and trial deadlines, including depositions and discovery, would be cancelled and a status conference would be held before the court on Jan. 18,” the Justice Department said in a statement. The government said that under the joint plan, AT&T will file a status report with the court by noon on Jan. 12 indicating “whether they intend to proceed with the transaction at issue in the litigation, whether they intend to proceed with another transaction, the status of related proceedings with the Federal Communications Commission (FCC) and their plans and timetable for seeking any necessary approval from the FCC.”

In a statement on Monday, AT&T said it is working with T-Mobile on “whether and how” to proceed with the deal.

“AT&T is committed to working with Deutsche Telekom to find a solution that is in the best interests of our respective customers, shareholders and employees,” the company said. “We are actively considering whether and how to revise our current transaction to achieve the necessary regulatory approvals so that we can deliver the capacity enhancements and improved customer service that can only be derived from combining our two companies’ wireless assets.”

Until now, AT&T has plowed full steam ahead with the proposed $39 billion deal, despite objections from a long list of competitors and regulators, including the FCC, DOJ, Sprint and C Spire Wireless (formerly known as Cellular South).

With the Federal Communications Commission threatening to block the deal, and the Justice Department already suing to do the same, AT&T last month pulled its application before the FCC, in hopes that a court would take its side in the DOJ case. The company said it would deal with the FCC once a court heard its case with the Justice Department.

However, the DOJ one-upped the telecom giant on Friday, arguing that the court case should be put on hold, now that AT&T has yanked its application to the FCC to acquire T-Mobile’s licenses.

Check.

Your move, AT&T.

Update: For its part, AT&T general counsel Wayne Watts says the company is “anxious to bring to the American consumer the benefits of increased wireless network capacity and efficiencies that can only arise from combining the resources of AT&T and T-Mobile USA,” and is “eager” to present its case in court.

The charge reflects $3 billion in cash and $1 billion worth of spectrum that AT&T will owe T-Mobile parent Deutsche Telekom if the deal fails to garner regulatory approval.

The companies also said they would withdraw their pending applications before the Federal Communications Commission seeking approval for the deal, though they intend to continue fighting for it.

“AT&T Inc. and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom’s U.S. wireless assets to AT&T and are taking this step to facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice,” the companies said in a statement. “As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval.”

The FCC chairman earlier this week indicated he was seeking a hearing on the deal, which commission staff found will lessen competition and lead to fewer U.S. jobs.

AT&T is already facing a Department of Justice lawsuit seeking to block the $39 billion purchase.

The Department of Justice has already filed suit seeking to block the deal, which requires approval from both agencies.

FCC Chairman Julius Genachowski has circulated a draft opinion that would seek to have a hearing before an administrative law judge, though the commission is likely to hold that hearing only after the DOJ suit is decided. If the Justice Department is successful in its effort, the FCC move would be moot. However, AT&T now needs to go 2-for-2 if it hopes to complete the deal.

The decision is not shocking, given that the FCC had indicated it shared some of the Justice Department’s concerns.

However, what is noteworthy is just how strong the agency’s concerns are.

FCC officials said on Tuesday that the agency found in its review not only that the deal would hurt competition, but also that it represents an unprecedented reduction in competition. In every market except Omaha (where T-Mobile does not offer service), the agency found that the merger would reduce competition to a meaningful degree.

The agency staff also rejected AT&T’s claims that the deal would lead to a faster or more complete rollout of 4G. And, rather than create jobs, the FCC staff believes approval of the deal would actually lead to fewer U.S. jobs.

AT&T, naturally, said it was not thrilled with the decision.

“The FCC’s action today is disappointing,” said Larry Solomon, SVP of corporate communications. “It is yet another example
of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both. At this time, we are reviewing all options.”

In addition to setting up a possible second court battle, the FCC findings also mean that any proposed settlement would have to satisfy two agencies, both of whom seem to see little merit — and lots of harm — in the deal. Oh yeah, Sprint and C-Spire Wireless have also filed suits of their own.

The arrival of the iPhone 4S — and its availability on Sprint — means that T-Mobile is now the only one of the four national carriers not selling Apple’s smartphone. That, T-Mobile said, could mean some rough sailing in the all-important fourth quarter, which runs through the end of December.

For the third quarter, T-Mobile saw a slight dip in revenue, but operating income before charges was up from a year ago. The carrier, which is owned by Germany’s Deutsche Telekom, saw third-quarter service revenue of $4.67 billion — up 1 percent from the prior quarter, but slightly down from $4.71 billion taken in during the year-ago quarter. Operating income, excluding various items, was $1.45 billion, up from $1.32 billion reported in the third quarter of 2010.

The company said it added 126,000 customers, down slightly from the 137,000 it added in the same quarter a year ago.

“Earnings improved as we continued to focus on making smartphones affordable to all Americans through our unlimited Value plans, improvements to our 4G network, and an expanding portfolio of 4G devices,” T-Mobile USA CEO Philipp Humm said in a statement. “Discipline on the cost side contributed to year-on- year margin improvement, while postpay churn, in particular related to the iPhone 4S launches by competitors, will continue to be an area of concern.”

The biggest issue for T-Mobile USA, of course, remains its pending sale to AT&T. The U.S. Justice Department — as well as rivals Sprint and C Spire Wireless — seeks to block the deal. T-Mobile said it remains committed to the transaction, which it hopes to close in the first half of next year.

U.S. Chief Technology Officer Aneesh Chopra and California Rep. Anna Eshoo, D-Palo Alto, got a walk-through of the Palo Alto foundry, as well as AT&T’s pitch on how it hopes to use the facility to spur innovation, fuel start-ups and create jobs. AT&T is the latest carrier to set up digs in the Bay Area, a list that includes Sprint and Verizon Wireless, as well as overseas carriers, including Vodafone, which earlier this month inaugurated a Redwood City facility.

Chopra said the site, which is designed to allow AT&T to more easily partner with small companies, is an example of how technology jobs created in one place can spill over to other parts of the country.

“In today’s information-driven economy, products and services can connect from anywhere and to anywhere,” Chopra said, as he wrapped up his tour of the facility. “Job creators need not wait for job opportunities locally.”

For her part, Eshoo praised AT&T’s work at the facility, even if she has been a vocal opponent of the company’s proposed $39 billion deal to buy T-Mobile USA.

As for her opposition to the deal, even that is not necessarily set in stone.

“I think there is work to be done on it,” she told AllThingsD. “Some of the problems, at least that I have with it, and some others about the merger, is not a newer AT&T that you experience here, but the older one. It’s up to the DOJ, I think, and the company, to work on that.”

The key thing, she said, is to create an environment with competition that creates new businesses.

“I want to see new companies being born every split second of every day,” Eshoo said. “We have the capacity to do that in this country. If anyone doubts it, they should just come here and visit this and so many other places in the Valley.”

Chopra steered clear of commenting on the T-Mobile deal, instead talking about his priorities when it comes to mobile technology and jobs, including freeing up spectrum and speeding development of a public safety-oriented wireless network.

Eshoo, too, was happy to talk about the need to free up more wireless spectrum, an issue upon which she and AT&T are in agreement.

Meanwhile, since it can’t get all of the regulators and lawmakers to come to it, AT&T has also launched an ad blitz in D.C. to make its case for the merger.

The department filed an amended legal complaint in a Washington D.C. federal court to indicate that state attorneys general from New York, Washington, California, Illinois, Massachusetts, Ohio and Pennsylvania have joined the case.

“We are pleased that these states have joined the department in its lawsuit,” the department said in a written statement. “Together, we will seek to protect consumers from the anticompetitive harm that would result from this proposed transaction.”

Read the rest of this post on the original site »

A Deutsche Telekom spokesman said that AT&T could pull out of the deal if the concessions needed to get approval were above $7.8 billion, but said the German company would still be entitled to the break-up fee package.

Reuters, citing an unidentified insider, reported Monday that AT&T may get around that agreement if certain conditions are met.

Read the rest of this post on the original site »

Sprint has already voiced its objections to the deal, and last week the Department of Justice filed its own suit seeking to block the deal. In a statement, Sprint said its suit is being filed as a related suit to the DOJ case.

In announcing the suit, Sprint reiterated its standard arguments against the deal, saying it would both hurt competition and harm consumers.

“Sprint opposes AT&T’s proposed takeover of T-Mobile,” Sprint litigation VP Susan Z. Haller said in a statement. “With today’s legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal.”

An AT&T representative was not immediately available for comment.

In the wake of last week’s move by the Justice Department, both AT&T and T-Mobile parent Deutsche Telekom vowed to fight on. In addition to needing to prevail in court in the Department of Justice suit, the companies also need approval from the Federal Communications Commission, which said last week that it too has serious concerns about the deal.

Update: In a statement, AT&T criticized Sprint’s suit and reiterated its case for the merger.

“This simply demonstrates what we’ve said all along – Sprint is more interested in protecting itself than it is in promoting competition that benefits consumers,” AT&T said. “We of course will vigorously contest this matter in court as AT&T’s merger with T-Mobile USA 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; and result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.”

Also, here’s a copy of the suit:

Sprint Suit to Block AT&T – T-Mobile

For months, the company had been working not only on testing the Apple device, but also on upgrading all aspects of its business, from big things such as expanding its network capacity, to details such as refining the process used to assign phone numbers and the one used to activate new devices.

Still, Small covered a lot of ground on launch day, beginning it inside a Verizon retail store before heading back to the company’s “war room” to make sure that the systems were keeping pace with the crush of new activations. Like any good engineer, Small said he had overprepared.

“We were prudent,” Small said on Thursday during an interview near the company’s Basking Ridge, N.J., headquarters.

In addition to reminiscing about the past, Small also talked about Verizon’s future, including the rollout of its LTE-based 4G network, as well as how Verizon plans to distinguish itself now that AT&T is launching an LTE network of its own.

On that last point, Verizon’s strongest selling point will be the depth of its network, having already deployed it in well over 100 markets, with plans to hit 175 by year’s end. AT&T is expected to point out that it has not only an LTE-based 4G network but also an HSPA+ network that is far faster than the 3G speed Verizon offers in locations where it has yet to deploy LTE.

Small counters by touting the reliability of Verizon’s 3G network, as well as the head start that Verizon has with LTE. Most people, Small said, will have a 100 percent LTE experience, and even those who don’t “will fall back to the most reliable network that is out there.”

“I think the average consumer will prefer and value the quality and reliability of our network,” Small said.

Despite some speculation to the contrary, Small believes the industry will be able to pull together and eventually be able to offer LTE cellphones that work across different carriers, even if today’s devices lack such roaming abilities.

“I think the ecosystem will certainly converge at the appropriate time,” Small said, noting that Verizon Wireless is already having talks with its global partners, China Mobile and Vodafone.

“We’ve had a fair amount of dialogue,” he said.

One area the company has been remarkably quiet on is AT&T’s pending $39 billion deal to acquire T-Mobile. While Sprint has vocally opposed the deal since day one, Verizon has sat quietly on the sidelines.

Small said he wasn’t surprised at the government’s move to block the deal, nor would he have been shocked if the deal had been allowed to proceed without objection.

“Our CEO has said this — ‘we’re here to serve our customers,’” Small said. “We’ll let AT&T and T-Mobile and others worry about other things. I think the industry has recognized and rewarded us for that.”

In a surprisingly early and decisive move, the Department of Justice on Wednesday filed suit to block AT&T’s planned $39 billion purchase of T-Mobile USA. Justice Department attorneys said that they are concerned the deal will lessen competition, ultimately leading to higher prices for consumers.

Experts say the broad worry about the reduction in competition makes it tough to imagine what sort of sweeteners the companies could create to make the deal easier to swallow.

“Given the nature of the specific concerns articulated by the DOJ, those types of concerns are hard to address through concessions,” said Maury Mechanick, a telecommunications attorney with White & Case.

As a result, it would appear that AT&T and T-Mobile will have to weigh whether they are willing endure an all-out court fight to try to preserve the deal.

And oh, what a fight it would be. In order for the deal to go forward, AT&T would have to convince a federal court to see things its way as well as prevail on any appeals, a process that is uncertain, not to mention costly and time-consuming. Even if they ultimately prevail in court, the companies still need the approval of the Federal Communications Commission.

Both FCC Chairman Julius Genachowski and Commissioner Michael Copps issued statements on Wednesday saying that they, too, have concerns about the deal. While the FCC review is separate from the one being done by the Justice Department, the statements indicate the two agencies seem to be on the same page when it comes to the deal.

One FCC insider noted that the agency has never approved a deal that the Justice Department sued to block.

For now, both AT&T and T-Mobile parent Deutsche Telekom say they are willing to fight for the deal. AT&T has asked for an expedited hearing on the matter.

As reported in March around the time the merger was first proposed, T-Mobile, a division of Deutsche Telekom, stands to gain about $3 billion in break-up fees should the deal fail to close. AT&T would also give T-Mobile certain wireless spectrum that’s not needed for the rollout of its next-generation wireless network.

While AT&T has said it plans to fight the action in court, the sudden move by the Justice Department and the fact that the Federal Communications Commission — which would also have to sign off on the deal — has yet to weigh in on it, make it extremely unlikely that the merger will ever be consummated, says James Ratcliffe, a telecom analyst with Barclays Capital in a note to clients today. He points out that, historically, when they challenge mergers in court, the agencies tend to win about 60 percent of the time.

“We believe that the deal is by no means dead, as the DOJ has stated that the ‘door is open’ for AT&T to propose remedies, but the fact that the DOJ took this strong step this early in the process makes the probability of completion much lower,” he wrote. “We now view the probability of success at 35-40%, down from our previous 75% view.”

One of the primary arguments in the complaint (the original filing is embedded below via Scribd) focuses on government and enterprise customers. Where critics of the deal would charge that the only notable competitors to AT&T and T-Mobile are Sprint and Verizon Wireless, AT&T management would rebut that Leap and MetroPCS are also players. The DOJ complaint discounts that argument, especially with regard to business and government customers. Leap and MetroPCS are really regional players, the DOJ says, and so corporations and government agencies with many offices around the country can only realistically consider national carriers, the number of which would be reduced to three were the deal approved.

“T-Mobile makes its presence felt competing head to head with AT&T and other carriers for a number of accounts, winning business in some cases and often pushing prices lower when it does not,” the DOJ’s complaint reads. “The merger’s elimination of T-Mobile as an aggressive competitor would likely result in fewer choices and higher prices for enterprise and government customers.”

And while the DOJ has drawn its legal line in the sand, it’s not the only agency yet to be heard from. The Federal Communications Commission would also have to sign off on the deal for it to be approved. Its chairman, Julius Genachowski, issued a carefully worded statement that gives a strong hint that it will ultimately oppose the merger. “Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition,” Genachowski said.

In a conference call with reporters today, Harold Feld, the legal director of PublicKnowledge, a telecom advocacy group that has opposed the merger, speculated that the FCC will likely send the matter to an administrative law hearing, which he called “the kiss of death” for mergers. “By the time that procedure would be finished, T-Mobile would have taken its breakup fee and gone and built an entirely new network,” he said.

So on what legal basis might AT&T and T-Mobile fight the case? The DOJ is using some new market analysis techniques that haven’t been used in antitrust cases before, says Barclays’s Ratcliffe. “Traditionally, the DOJ has used regional impact analysis to study the impact of wireless mergers, and it does so here again,” he writes. “In addition, however, the DOJ is also viewing the market as being national, a comparatively new approach, which might be more open to challenge in the courts.”

AT&T CEO Randall Stephenson has promised to fight it, and continued to argue that the deal will bring real benefits to spectrum management nationwide, and create jobs. Deutsche Telekom said it will join the fight, too.

Justice-ATT-TMobile-Complaint

Bernstein analyst Craig Moffett thinks the DOJ’s lawsuit means the deal is doomed. “Yes, technically there are alternatives. Indeed, AT&T has already indicated that it will ‘vigorously contest’ the DOJ’s decision,” he says. “But with the Department of Justice having sued to oppose the deal, and with the FCC now having made public comments that are unambiguously supportive of the DOJ’s opposition, AT&T’s acquisition of T-Mobile can be considered all but definitively dead.”

But other analysts disagree. BTIG’s Walter Piecyk thinks AT&T will take the DOJ to the mat over this deal in a battle that could rival the one Oracle fought to clear its merger with PeopleSoft.

“We expect AT&T to fight the Department of Justice in court in order to acquire T-Mobile USA just like Oracle successfully did in 2004 in order to acquire PeopleSoft,” Piecyk said in a note to clients. “While AT&T’s challenge might be more challenging, it is incentivized by a large breakup fee of $3 billion in cash, spectrum that we estimate is worth at least $1 billion and a data roaming agreement. Of course, AT&T could still work out a settlement with DOJ, but the body language from Deputy Attorney General James Cole at the press conference today seemed a bit aggressive.”

Finally, Barclays analyst James M. Ratcliffe says the deal is still viable, though AT&T’s chances of pushing it through are a bit diminished. “The DOJ’s filing to block the AT&T/T-Mobile merger comes as something of a surprise, with the timing much earlier than we had expected, given that the FCC is nowhere close to completing its review of the deal,” he says. “We believe that the deal is by no means dead, as the DOJ has stated that the ‘door is open’ for AT&T to propose remedies, but the fact that the DOJ took this strong step this early in the process makes the probability of completion much lower. We now view the probability of success at 35-40 percent, down from our previous 75 percent view.”

Earlier on Wednesday, the Department of Justice filed suit seeking to block the deal on the grounds it would harm competition. AT&T said it was surprised by the government’s move and vowed to fight in court.

In a statement to AllThingsD, the German telephone giant said the U.S. government is wrong to block the proposed $39 billion deal.

“Deutsche Telekom is very disappointed by the DOJ’s action, and will join AT&T in defending the contemplated merger against the complaint in court,” DT Executive Vice President Philipp Schindera said. “(The) DOJ failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction, which would lead to significant customer, shareholder, and public benefits.”

Schindera did say he appreciated the apparent willingness of regulators to discuss possible remedies.

In television ads, the No. 4 U.S. carrier crafted an image of itself as an attractive woman in a pink dress, only too happy to aid customers with faster service and cheaper prices. AT&T and other rivals were portrayed as stuffy men in suits, literally looking to grab every nickel and dime from consumers. The ads were so popular that merger opponents even seized on the metaphor.

When it came time to argue in favor of the acquisition, AT&T painted a different picture, arguing T-Mobile was actually a weak player, lacking the needed resources and spectrum to compete. AT&T aimed to paint T-Mobile as just one of many competitors in a field that included a range of regional players such as Metro PCS and Cricket.

“Sprint, MetroPCS, and Leap are rapidly gaining customers while T-Mobile USA is losing customers, especially contract customers,” AT&T maintained in a June filing with the Federal Communications Commission. “Those providers — along with U.S. Cellular, Cellular South, and a host of others — can rapidly fill any competitive gap T-Mobile USA leaves upon the completion of this transaction.”

By bringing a suit to stop the deal on Wednesday, government regulators made clear how they saw things. Wednesday’s legal filing borrows much from T-Mobile’s positioning of itself as the scrappy carrier ensuring competition.

“T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network,” Acting Assistant Attorney General Sharis A. Pozen said in a statement announcing the DOJ suit to block the deal. “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.”

To be sure, federal regulators had plenty of more substantive arguments against the deal, including filings from Sprint and a number of consumer groups. But much of the decision essentially boils down to whether T-Mobile is a significant fourth competitor, as its ad campaign had argued, or if, as AT&T was arguing, T-Mobile was a weak player whose acquisition would not substantially harm competition.

And, when forced to make that decision, regulators were clear. They went with the lady in the pink dress over the guy in the suit.

AT&T has been lobbying heavily in favor of the deal, most recently pledging to add call-center jobs in the U.S. if the deal were approved. Meanwhile, Sprint and some consumer groups have vigorously opposed the deal, saying it would harm competition and lead to higher prices.

In a statement, AT&T general counsel Wayne Watts said the company was “surprised and disappointed” by the DOJ move and will seek an expedited hearing to make its case to the courts in favor of the deal.

Here’s his full 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 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.

Update: Sprint, meanwhile, was predictably pleased with the DOJ move, calling it “a decisive victory for consumers, competition and our country.”

“By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first,” Sprint Senior VP Vonya McCann said in a statement. “Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision — one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”

Filed in the United States District Court for the District of Columbia, the DOJ’s complaint says T-Mobile “places important competitive pressure on its three larger rivals” and argues its purchase by AT&T would be bad for consumers.

“AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the Justice Department said in its suit. “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.”

And Federal Communications Commission Chairman Julius Genachowski said in a statement:

By filing suit today, the Department of Justice has concluded that AT&T’s acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws. Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices.

The carrier also said it will promise that no U.S. call center jobs will be lost when the deal closes. The company didn’t say where the new jobs will be based.

“At a time when many Americans are struggling and our economy faces significant challenges, we’re pleased that the T-Mobile merger allows us to bring 5,000 jobs back to the United States and significantly increase our investment here,” AT&T CEO Randall Stephenson said in a statement.

Of course, critics are sure to note that there’s nothing stopping AT&T from bringing back jobs without buying T-Mobile.

The deal, which is being opposed by Sprint and a number of consumer groups, requires approval from the Federal Communications Commission and Department of Justice.

The suits were filed in eight jurisdictions across the U.S. where the Bursor & Fisher law firm has filed arbitration cases.

The law firm has been seeking to attack AT&T’s planned T-Mobile acquisition by bringing arbitration cases on behalf of individual AT&T customers. The firm recently said that it had signed up more than 1,000 customers looking to attack the deal.

AT&T has maintained that the arbitration clause in its contract with customers cannot be used for such efforts.

“This merger will provide tremendous benefits for customers and unleash billions of dollars in badly needed investment, creating many thousands of well-paying jobs that are vitally needed given our weakened economy — a fact that’s been recognized by consumers, public officials and groups of all types,” AT&T told AllThingsD. “However, the bottom line here is an arbitrator has no authority to block the merger or affect the merger process in any way. AT&T’s arbitration agreement with our customers — recently upheld by the Supreme Court — allows individual relief for individual claims. Bursor & Fisher is seeking class-wide relief wrapped in the guise of individual arbitration proceedings, which is specifically prohibited by AT&T’s arbitration agreement. Accordingly, the claims are completely without merit. We have filed suit in order to stop this abusive action.”

AT&T, of course, is seeking to buy T-Mobile USA in a deal valued at $39 billion. The deal requires FCC and Department of Justice approval, but a number of governmental and other organizations have sought to have their say as well.

Bursor & Fisher, which has specialized in law suits against wireless carriers, last month said it was aiming to use AT&T’s mandatory arbitration clause against the firm.

“There seems to be a real groundswell against this merger,” lawyer Scott A. Bursor said in a statement. “The good news is that it can be stopped. AT&T’s contracts give every customer the right to arbitration. And we’ve assembled a team of lawyers standing by ready to represent them on a purely contingent basis, with no out-of-pocket costs whatsoever.”

AT&T maintains the arbitrators have no authority to weigh in on the T-Mobile deal.

“Putting aside for the moment that our merger will provide tremendous benefits for customers — a fact that’s been recognized by consumers, public officials and groups of all stripes — the bottom line is an arbitrator has no authority to block the merger or affect the merger process in any way,” an AT&T representative told AllThingsD on Tuesday. “This action is a waste of time and money because AT&T’s arbitration agreement with our customers — recently upheld by the Supreme Court — allows individual relief for individual claims. It specifically prohibits any proceeding seeking broad relief like the Bursor & Fisher law firm has filed.”

Of course it will be up to the arbitrators, and perhaps the courts, to ultimately determine whether or not they have authority to block the deal. The deal, for sure, needs the approval of the Federal Communications Commission and Department of Justice, both of which are reviewing it.