Federal judge sets hearing on AT&T, T-Mobile deal

Carriers, U.S. Department of Justice scheduled to meet in court Sept. 21

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A quick settlement or a protracted legal battle?

We'll have to wait until at least Sept. 21 to get a sense of whether the U.S. Department of Justice is willing to entertain a settlement with AT&T in its proposed $39 billion purchase of T-Mobile USA from Deutsche Telekom.

The New York Times reports that a federal judge has instructed the DoJ, AT&T and Deutsche Telekom to "be prepared to discuss the prospects for settlement" at a status conference two weeks from today.

The DoJ on Aug. 31 filed its lawsuit to stop the deal.

AT&T and Verizon Wireless are the two largest wireless carriers in the U.S., with No. 3 Sprint and No. 4 T-Mobile USA lagging far behind.

But should the deal be approved, AT&T would become the largest U.S. wireless carrier, with Sprint Nextel -- which has about 16% or 17% of the market -- essentially struggling to survive against two larger competitors. The result, Justice Department officials argue, would "remove a significant competitive force from the market."

Truthfully, T-Mobile USA really isn't a "significant competitive force in the market," unless you consider 11% market share significant. But its disappearance via merger would result in a duopoly, with AT&T and Verizon splitting about 80% of the U.S. wireless market.

Critics of the merger, along with Justice Department officials, fear this would result in fewer choices for wireless customers as well as higher prices.

Sprint, meanwhile, has filed a lawsuit of its own Tuesday, arguing that by "acquiring T-Mobile, AT&T would be removing a low-price and innovative maverick competitor that provides particularly disruptive competition. The injuries to Sprint and the public at large would be irreparable if the merger were completed."

The U.S. Federal Communications Commission also has a say in the proposed merger, which it is still reviewing.

While the Justice Department's emphatic language would imply a bold line in the sand, David Balto, an antitrust attorney and former policy director at the U.S. Federal Trade Commission, told IDG News Service, that it's all strategery, as a recent former U.S. president would say:

"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."

Cue the behind-the-scenes negotiating.

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