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Suit to stop AT&T, T-Mobile merger: a boon for consumers?

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(Read caption) This file combination photo displays logos for AT&T (left) and Deutsche Telekom AG. The Justice Department filed suit Aug. 31, 2011, to block AT&T's $39 billion deal to buy T-Mobile USA on the grounds that it would raise prices for consumers.

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If the Department of Justice succeeds in deep-sixing the proposed merger between AT&T and T-Mobile USA, consumers could come out ahead.

That’s partly because, as consumer groups have argued all along, the more competitors there are in the marketplace, the less mobile-phone service is likely to cost. If one of those competitors is feisty T-Mobile, which consistently has offered lower-cost and more innovative plans than its competitors, the marketplace will be especially well served.

There are at least two other reasons a broken merger could help:

First, T-Mobile’s merger agreement with AT&T stipulates that AT&T pay it a $3 billion breakup fee in case the merger doesn’t go through, says Parul Desai, policy counsel for Consumers Union, a consumer information group in Yonkers, N.Y., and publisher of Consumer Reports. That money could help the small mobile carrier enhance its services even more.

Second, not merging with giant AT&T could pave the way for a merger with smaller Sprint, creating a joint entity that could provide more competition for AT&T and Verizon.

The Justice Department’s suit Wednesday to block the merger is a win for consumers, Ms. Desai says. “In this case, consumers can put a W next to their name.”


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