Will AT&T, T-Mobile Merger Survive Litigation?

Lora Bentley

When I first heard the U.S. Department of Justice had blocked the AT&T, T-Mobile merger, I was shocked. Not because the proposed combination didn't deserve extreme scrutiny given both AT&T's history and the large number of wireless customers who would be affected, but because regulators didn't give the company conditions under which the merger might have been approved.

 

In the years that I've been writing this blog, I don't know that I've seen an outright acquisition denial on antitrust grounds. Even the Google DoubleClick deal was approved with conditions. But the DoJ indicated that blocking the merger was the only way to preserve a "vibrant and competitive marketplace." At the time, AT&T promised to seek review of the decision.

 

Now, as IT Business Edge blogger Carl Weinschenk pointed out, the parties have resorted to the courts to sort out the mess. Sprint, the number three wireless provider in the U.S., is joining the DoJ in seeking to block the merger.

 

In a move that was suprising to some, Verizon CEO Lowell McAdams spoke in favor of the merger and criticized U.S. regulators for "regulat[ing] the industry without actually passing regulations," according to Slash Gear. For McAdams, the merger is more about making the best use of spectrum than it is an attempt to monopolize the market. He said the government will have to be more aggressive with its wireless spectrum plans if it continues to block the merger.

 

Several House Republicans also spoke in favor of the merger, The Wall Street Journal reports. In a letter to President Obama, Rep. Pete Olsen (R-Texas) and his colleagues claimed blocking the AT&T, T-Mobile combination would "thwart job creation and economic growth."


 

How will the court come down? That remains to be seen. But in the event the merger is blocked completely, AT&T will be out around $3 billion in damages it must pay to T-Mobile.



Add Comment      Leave a comment on this blog post
Sep 27, 2011 4:20 AM John John  says:

I am very hopeful that the Merger will be blocked.  Additionally, I am saddened by the news that T-Mobile won't be a player for iPhone 5. Claiming they are waiting for the call from Apple.  Since T-Mobile is an iPhone carrier in other markets already I don't understand what the hold up is?  I am thinking T-Mobile is trying to tank itself so that they can be bought out. 

T-Mobile has been a major player in the affordable wireless arena.  They are the main reason AT&T and Verizon aren't charging $75 for 400 minutes right now.  Without them the prices will go up and never come down.

Somehow I think T-Mobile not having the iPhone 5 is part of this.  I just don't know how yet.

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Sep 29, 2011 1:03 AM Booger Booger  says: in response to John

@ John. So with T-Mobiles parent company wanting out of the U.S. market and tried selling it to 4 other carriers BEFORE going to AT&T, people leaving T-Mobile the past 2 years in large numbers, and little to no improvements and build out of the T-Mobile network, T-Mobile is the Titanic. Even without the merger, T-Mobile is still on it's way out. Even if it goes bankrupt and gets absorbed and sold off to multiple companies. No matter how you shake it, it will still be one less competitor and nulls some of the arguments being made for it to not be absorbed by AT&T.

It's no coincidence the companies with the cheapest plans, also have the most debt and problems. T-Mobile has been this way the past few years. Long prior to discussions with anyone, let alone AT&T.

Long story short....T-Mobile is toast. With or without the merger. This has been a longtime coming.

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Sep 29, 2011 12:07 PM Alton Drew Alton Drew  says:

The DOJ's relevant product and relevant geographic market determinations are questionable.  The court is not beholden to the HHI calculated by DOJ.  Politically, I don't see the parties wanting to take this antitrust matter into an election year.

Can the Obama administration afford to look anti-business, anti-innovation, anti-job growth, and anti-market because of some fear that an already imperfect competitive market model is going to remain an imperfect competitive model if the transaction is approved?

Assuming the DOJ's argument that the relevant geographic market is national (which it is not), can blocking the transaction create a competitive market?

Only if your an alchemist.

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Sep 29, 2011 12:27 PM Ryan Ryan  says:

Why is it a surprise that Verizon spoke in favor of the merger? If AT&T and T-Mobile merged it would leave only AT&T, Verizon, and Sprint. Soon, Sprint would have to close it's door since they would just not be able to compete with two companies which would make up over 80% of the US Mobile Phone market. All that would be left is Verizon and AT&T which would then collude together to steadily raise their rates and Americans would be able to do nothing about it since we are a society complete dependent on cell phones.

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Oct 17, 2011 2:22 AM Chris Chris  says:

I want the merger to go through.  As a previous AT&T customer of 6 years (and still would have been had I not been jobless for so long), I was pleased with their call and text services.  But I'm with T-Mobile now and have been very displeased with their data network and how horrible it is in the Seattle area, which is HOME for the company.  And nay-sayers need to understand that their current rates won't change even if things did get more expensive post-merger.  Why?  Grandfathering!  Everyone already has a cell phone plan these days.  A massive minority would be affected in terms of rate changes, and that's all THEORETICAL.  3 big companies would still remain and several smaller companies (Cricket, Virgin, Boost, etc) could keep it competitive.  AT&T just needs to improve their customer service representation and understand that, if they do acquire T-Mo, being #1 gives them the advantage of offering the most competitive pricing with the largest subscriber base. 

If you don't like the services or pricing, then switch carriers or don't drop your current deals!  You'll keep a good plan and price and not be affected in the future.  If you don't like contracts then don't agree to one and buy your phone full price.  And the word monopoly being tossed around about AT&T needs to stop.  It's so far from the reality of the potential outcome it's got more in common with 12 year old schoolgirl gossip than fact-based truth.

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Dec 3, 2011 12:56 PM pmciff pmciff  says:

why should AT&T have to pay t-moble 3 billion.  t-moble won,t even let a customer out of a contract (without early terminaton fee). where they don,t offer good coverage?

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