The Courts Begin Determining the Fate of 'AT&T-Mobile'

Carl Weinschenk

The question of whether AT&T and T-Mobile will be allowed to merge has entered what could best be called its "highly litigious" stage. In other words, filings will go back and forth in lawsuits by the U.S. Department of Justice and Sprint that are aimed at stopping the deal. The main features will be the creation of long, expensive and largely indecipherable documents. At the end of the day, the parties are more likely than not to strike deals ending the cases and letting some form of the merger go forward.

This week, AT&T filed its response in the DoJ suit, which is in the United States District Court for the District of Columbia. Reuters reports that AT&T argues that the merger will increase competition. This, of course, is the opposite of what the DoJ claims. Here is part of PCMag.com's take:

Not surprisingly, AT&T had a different take. In its Friday response, the carrier said buying T-Mobile will result in "increased output, higher quality service, fewer dropped calls, and lower prices to consumers than without the merger." Rather than lessen competition, AT&T said, "the combined firm will usher in more intense competition to an already vibrantly competitive market."

Essentially, AT&T argues that T-Mobile is losing customers and is not an innovator. Standing alone, T-Mobile would not, over time, substantially increase competition in the marketplace. Moreover, any anti-competitive tendencies by the newly combined company would be kept in check by what it suggests is a healthy lineup of regional and national carriers:

"The Department does not and cannot explain how, in the face of all of these aggressive rivals, the combined AT&T/T-Mobile will have any ability or incentive to restrict output, raise prices, or slow innovation," AT&T said. "Nor can it explain how T-Mobile, the only major carrier to have actually lost subscribers in a robustly growing market, provides a unique competitive constraint on AT&T."

CNNMoney looked closely at the response and suggested that AT&T is playing verbal games. Essentially, its statement that T-Mobile is the only major player losing subscribers only is true if a very specific set of definitions is used. Similarly, the post suggests that AT&T's position that T-Mobile doesn't offer significant competition as a standalone is difficult to reconcile with its position that the market now is competitive. In other words, if the fourth biggest carrier isn't offering competition, how can it be coming from smaller and more isolated companies?

Chitika Insights compared the current market with what it likely will look like after the merger. In both cases, Verizon Wireless has 33 percent, Sprint 13 percent, MetroPCS 8 percent and "other" 2 percent. In today's world, AT&T has 43 percent and T-Mobile 8 percent. After a merger, the portions would be the same, with "AT&T-Mobile" holding a tad more than half the cake at 51 percent. The firm's take:

However, the future consequences are dire for the smaller networks because the AT&T/T-Mobile network would be able to dictate market prices. Perhaps, more worrying for the likes of Sprint and MetroPCS is that their subscribers will be tempted away by the greater combined coverage of the proposed behemoth.

The next big opportunity for billable hours is Sept. 21, when U.S. District Judge Ellen Segal Huvelle, who is presiding over the DoJ case, has scheduled a status hearing.



Add Comment      Leave a comment on this blog post
Sep 13, 2011 2:30 AM Lynn Scott Lynn Scott  says:

If the merger goes through, I will go to another carrier. I do not like AT&T and will never engage their services. They are sharks who do not care about their customers.

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Sep 13, 2011 3:08 AM Jason Jason  says: in response to Lynn Scott

Thats the opinion of one person Lynn, I have been in the telecom industry for 8 years now and suffice it to say I have been with them and competted against them. All telecom companies exist for a reason they have fulfill niches and diversify to stay alive in the market, that being said the merger takes a small exisitng GSM carrier and combines it with another. Verizon, Us Cellular, and Sprint still exisit on the CDMA platform. If a consumer dosn't like PC they go to MAC you have your MAC of the cellular company to choose from, if you want to compare this to the computer world it would be like IBM merging with HP. Will it create a monoploy, no! Will it make At&t's network a lot better hell yeah!

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