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T-Mobile has been an important source of competition, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network, according to Sharis Pozen, acting chief of Justice’s antitrust division.

AT&T and T-Mobile compete nationwide, in 97 of the largest 100 cellular marketing areas, according to the suit filed in U.S. District Court in Washington. They also vie for business and government customers.

The lawsuit says the acquisition would eliminate a company that has boosted competition with low pricing and innovation.

T-Mobile had the first handset using the Android operating system, Blackberry wireless email, the Sidekick smart phone, national Wi-Fi “hotspot” access and a variety of unlimited service plans.

In a statement, Sprint said the Justice Department’s lawsuit “delivered a decisive victory for consumers, competition and our country. By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first.”

Federal Communications Commission chairman Julius Genachowski said the record before his agency “raises serious concerns about the impact of the proposed transaction on competition.”

Although the FCC’s separate review of the proposed merger is still ongoing, the agency has never approved a significant merger that is being challenged by the Justice Department.

Commission member Michael Copps, a Democrat and a staunch opponent of industry consolidation, said he shares “the concerns about competition and have numerous other concerns about the public interest effects of the proposed transaction, including consumer choice and innovation.”

Democratic Sen. Herb Kohl of Wisconsin, who heads the Senate Judiciary subcommittee on antitrust, competition policy and consumer rights, said the suit was an effort to protect consumers “in a powerful and growing industry that reaches virtually every American.”

The lawsuit used some of T-Mobile’s own documents describing its role in the market to explain why the merger shouldn’t take place. In those documents, the company calls itself “the No. 1 challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market.”

T-Mobile said its strategy is to attack other companies and find innovative ways to overcome the fact that it is a smaller company.

T-Mobile “will be faster, more agile and scrappy, with diligence on decisions and costs both big and small,” one company document said. “Our approach to market will not be conventional, and we will push to the boundaries where possible.”

Since AT&T first announced the deal in March, it has insisted that consumers would have a choice of multiple wireless providers, including Leap, Metro PCS and U.S. Cellular, in many markets even if the deal is approved.

The Justice Department rejected that argument. It said regional providers face “significant competitive limitations” because they do not have national networks. The department said the enormous investments and resources needed to acquire wireless spectrum and build a network make it very difficult for new companies to enter the wireless market.

AT&T and T-Mobile also have said the merger would reduce dropped and blocked calls, and speed mobile Internet connections for subscribers. Faster service would result by combining their limited wireless spectrum holdings at a time when both companies are running out of airwaves to handle mobile apps, online video and other bandwidth-hungry services.

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