Seven states have joined the Justice Department's lawsuit to stop AT&T's proposed purchase of T-Mobile USA, the Justice Department said on Friday.
Attorneys general from California, Illinois, Massachusetts, New York, Ohio, Pennsylvania and Washington have signed onto the effort to stop the $39 billion deal to merge two of the four large national cellphone carriers.
New York Attorney General Eric T. Schneiderman noted in a statement that New York City, Buffalo, Rochester, Albany and Syracuse could see less competition in the wireless space.
"This proposed merger would stifle competition in markets that are crucial to New York's consumers and businesses, while reducing access to low-cost options and the newest broadband-based technologies," he said in a statement.
The Justice Department says the acquisition of T-Mobile USA by AT&T would lead to higher wireless prices.
AT&T said Friday it was interested in reaching a settlement that would lead to Justice Department approval, and was confident the deal would go forward.
"It is not unusual for state attorneys general to participate in DOJ merger review proceedings or court filings," said AT&T spokesman Michael Balmoris.
AT&T also noted that 11 states support the deal. They are Alabama, Arkansas, Georgia, Kentucky, Michigan, Mississippi, North Dakota, South Dakota, Utah, West Virginia and Wyoming.
One concern among consumer advocates is that T-Mobile generally costs less than other carriers so its disappearance could mean higher prices for wireless service.
The deal would vault AT&T over Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc, into the No. 1 spot. T-Mobile USA is now owned by Deutsche Telekom AG.
Sprint, the third-largest carrier, has bitterly opposed the AT&T buy.
The two sides have a scheduling hearing on September 21 where they will address dates for an upcoming trial. The Justice Department wants a trial starting on March 19 while AT&T wants January 16.
It is often difficult for companies to hold potential transactions together during protracted reviews, and AT&T has asked for as speedy a trial as possible.
"These states would have a very big chunk of the geographic markets where DOJ has a concern about the antitrust implications of the deal," said Robert Doyle, a former antitrust enforcer now with the private law firm Doyle, Barlow and Mazard PLLC. "On balance, it's (the deal) in bigger trouble."
AT&T has defended the transaction, saying it would bring 5,000 overseas jobs back to the United States. AT&T has also pledged to extend high-speed Internet wireless coverage to 97 percent of all Americans.
The addition of the seven states could well complicate any effort to reach a settlement, said Maury Mechanick, a telecommunications attorney at the law firm White & Case LLP.
"It will not make a settlement impossible," said Mechanick. "It now means that you've got a larger number of people who have to say yes before a settlement can be reached."
The case is the Department of Justice v. AT&T, T-Mobile US A, U.S. District Court, District of Columbia, No. 11-01560.
(Reporting by Diane Bartz in Washington and Sinead Carew in New York, editing by Bernard Orr)