[via New York Times] – The Justice Department on Wednesday sued to block AT&T’s proposed $39 billion acquisition of T-Mobile, a deal that would create the largest carrier in the country and reshape the industry.

“The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services,” said Deputy Attorney General James M. Cole.

The complaint, which was filed in the United States District Court in Washington, said that T-Mobile “places important competitive pressure on its three larger rivals, particularly in terms of pricing, a critically important aspect of competition.”

The complaint also highlighted T-Mobile’s high speed network and its innovations in technology, noting that it was the first to use Google’s Android operating system and BlackBerry wireless e-mail, among other things.

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

Shares of AT&T dropped nearly 4 percent on the news, to less than $29. Shares of Deutsche Telekom, the parent of T-Mobile, fell 5 percent in trading in Frankfurt.

Ever since AT&T announced plans to buy T-Mobile from Deutsche Telekom for $39 billion in March, the deal has proved controversial. Lawmakers, consumer advocates, and rivals have voiced opposition to the merger, saying it would significantly reduce competition. The deal would have left just three major players: AT&T, Verizon and the significantly smaller Sprint Nextel.

The Justice Department’s complaint notes that while there are smaller telecommunications providers, none of their voice networks “cover even one-third of the U.S. population, and the largest of these smaller carriers has less than one-third the number of wireless connections as T-Mobile.”

AT&T has moved to drum up support for the deal of late. On Wednesday, it announced plans to bring 5,000 call-center jobs back to the United States.

“Does this shore up an issue that people have?” Randall Stephenson, AT&T’s chief executive, said in an interview on Tuesday. “Sure, I hope it does.”

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