US government blocks AT&T's takeover bid for T-Mobile

The US government on Wednesday took action in the US courts to block telecom company AT&T Inc's proposed purchase of T-Mobile USA Inc, on the ground that it would harm competition in the wireless market and lead to higher prices.

This represents the biggest antitrust challenge yet by the Barak Obama administration; but it hardly caught the industry by surprise - they have been expecting some such move since 31 August, when AT&T (T) chief executive officer Randall Stephenson said in a television interview that he expected his company's bid for T-Mobile to get government approval by the first quarter of 2012.

Following quickly on the heels of Stephenson's interview, AT&T lawyers received a call from the Justice Department saying that the government was suing to block the transaction, a Bloomberg report said.

The suit has halted the biggest deal of the year within the US. Worth $39 billion, it would have unseated Verizon Wireless as the top mobile carrier in the country. It is also perceived as drawing a line on antitrust policy that may affect other acquisitions in the sector that are already in the pipeline.

AT&T was reportedly under the impression that it would have more time to present ideas that would assuage the government's reservations about the deal. But in the end, the Justice Department concluded that the companies on the other side of the table weren't responding to concerns that the deal would hurt competition and raise consumer prices in the wireless phone market.

The administrative action is seen as a setback for Stephenson, who was poised for a career-defining deal that would allow him to emerge from the shadow of predecessor and serial acquirer Ed Whitacre.

The court case could take months and cost millions of dollars. Shares of AT&T slumped immediately after news of the administrative action.