The US Justice Department has filed a suit to block AT&T’s proposed USD 39 billion takeover of T-Mobile USA saying that the deal will reduce competition for mobile services, resulting in higher prices and poor quality of services.

The civil antitrust lawsuit, filed in US District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.

"The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the US facing higher prices, fewer choices and lower quality products for mobile wireless services," Deputy Attorney General James Cole said.

He added, "Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation?s wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition."

Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division, Sharis Pozen said unless this merger is blocked, "competition and innovation will be reduced, and consumers will suffer".

More than 300 million feature phones, smart phones, data cards, tablets and other mobile devices are in service in the US currently. Four nationwide operators - AT&T, T-Mobile, Sprint and Verizon - account for more than 90 per cent of mobile connections.

The proposed acquisition would combine two of the four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing, the Justice Department said.

According to the complaint, AT&T and T-Mobile compete head to head nationwide, including 97 of the nation’s largest 100 cellular marketing areas. They also compete for business and government customers.

The complaint cites a T-Mobile document in which the company explains that it has been responsible for a number of significant "firsts" in the US mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, national Wi-Fi 'hotspot' access and a variety of unlimited service plans.