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Baer Adds To Negative Outlook For T-Mobile Deal

NEW YORK (The Deal) -- Department of Justice antitrust chief Bill Baer capped off a week of news reinforcing analysts' predictions that Sprint Nextel Corp.  (S) would face a very difficult time winning federal approval of a potential bid to acquire T-Mobile USA Inc.

In prepared remarks for a speech delivered to the New York State Bar Association on Thursday evening, Baer highlighted the competition T-Mobile has continued to bring the wireless market after the DOJ filed a legal challenge that stopped AT&T's (T) proposed $39 billion takeover of T-Mobile in 2011.

The DOJ argued then that T-Mobile was a maverick competitor that was keeping downward pressure on prices and encouraging innovation and should remain an independent market participant. From Baer's remarks, it appears the DOJ still wants to retain the Deutsche Telekom-owned T-Mobile as the market's fourth player.

"Since AT&T terminated its effort to eliminate T-Mobile as a rival, T-Mobile has spearheaded increased competition in wireless services," according to his remarks, which were circulated before the speech. "Shortly after the merger was abandoned, T-Mobile announced a $4 billion investment in modernizing its network and deploying 4G LTE service. It then made a series of moves to offer cheaper and better customer contracts, including offering plans without annual contracts and selling Apple's (AAPL) iPhone 5 on better terms than the competition."

Baer also cited T-Mobile's deal in early January to acquire additional spectrum from Verizon Wireless (VZ).

Aggressive moves by T-Mobile and its rivals to steal each others' customers are helping consumers too, he said, noting that T-Mobile recently offered to pay the early termination fees of its competitors' customers when they switch to T-Mobile.

Other consumer benefits that arise from the competitive landscape include Sprint's decision to offer unlimited plans with competitive prices and innovative service arrangements; AT&T's recent offer of a $200 credit, plus money, for smartphone trade-ins to T-Mobile customers who switch; and all four major wireless providers' offer of frequent upgrades, Baer said.

"Competition today is driving enormous benefits in the direction of the American consumer," he noted.

Baer's remarks come on the heels of press reports that DOJ officials told Sprint board members Masayoshi Son and Dan Hesse that a takeover of T-Mobile would face a high hurdle.

The Wall Street Journal reported Tuesday that the board members were told by DOJ officials that they were skeptical the deal could be carried out without harming consumers. Wednesday, Baer told the New York Times that it would be difficult for the DOJ to approve a merger among any of the top four wireless phone companies.

Since Sprint's interest in T-Mobile was first reported in December, analysts who follow telecommunication policy have consistently said the odds are against either DOJ or Federal Communications Commission approving such a deal.

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