US Justice Dept probing Verizon deal with cable companies

WASHINGTON Wed Dec 21, 2011 3:49am IST

Customers wait in line outside a Verizon Wireless store in New York to buy the iPhone 4 shortly after the phone went on sale with Verizon service in New York, February 10, 2011. REUTERS/Mike Segar/Files

Customers wait in line outside a Verizon Wireless store in New York to buy the iPhone 4 shortly after the phone went on sale with Verizon service in New York, February 10, 2011.

Credit: Reuters/Mike Segar/Files

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WASHINGTON (Reuters) - The Justice Department is probing Verizon Wireless' multi-billion dollar deal to buy wireless airwaves from cable operators and let them resell its mobile service, the department said on Tuesday.

Under the agreement, which was reached on December 2, Verizon Wireless will pay top U.S. cable providers $3.6 billion for the spectrum.

The review follows the Justice Department's review and opposition to AT&T Inc's (T.N) $39 billion plan to buy T-Mobile USA - a deal AT&T gave up on this week.

The agreement, with a consortium that includes Comcast Corp (CMCSA.O) and Time Warner Cable Inc (TWC.N), puts new pressure on Verizon rivals Sprint Nextel Corp (S.N) and AT&T, which still needs more spectrum after ending its T-Mobile USA bid.

"My understanding is that it's the deal that we're looking at. We're looking at the proposed deal," said Justice Department spokeswoman Gina Talamona, who declined to outline any specific concerns the Justice Department had.

The deal was problematic because of the marketing arrangement, according to an antitrust source who is a veteran of the Justice Department.

"Comcast has decided not to compete and is handing spectrum over to Verizon," the source said. "They decided to halt the buildout. Instead of us seeing facilities-based competition, it appears that we're seeing collaboration."

Comcast declined comment, although a source close to the transaction said that paperwork for the antitrust review had not yet been filed.

A spokesman for Verizon said his company had not received any information on which it could comment.

Both Verizon Wireless and AT&T, the No. 1 and No. 2 U.S. mobile providers, have said they need more spectrum to support increased consumer demand for videos and other services that soak up bandwidth.

Verizon Wireless is owned by Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L). T-Mobile USA is owned by Germany's Deutsche Telekom AG (DTEGn.DE).

(Reporting By Diane Bartz; editing by Andre Grenon)

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