Blocking AT&T's Acquisition of T-Mobile May Not be a Plus
Sprint last week filed suit against AT&T in an attempt to block that company's $39 billion acquisition of T-Mobile USA, a cause that looks good on paper but is at odds with consumer demand for improved mobile experiences.
In its suit Sprint said the AT&T acquisition would hurt consumer and corporate customers by leading to higher prices and curtailing innovation, echoing charges levied in the antitrust lawsuit filed last month by the Justice Department.
BACKGROUND: Sprint sues to block AT&T-T-Mobile merger
The deal would, after all, combine AT&T's 32 percent share of U.S. wireless subscribers with T-Mobile's 11 percent share, creating a powerhouse with 43 percent share. Add that to Verizon's 33 percent share (according to Chetan Sharma Consulting) and you have one mega duopoly.
Sprint puts it this way: The deal would give AT&T and Verizon control of "more than three-quarters of that market and 90 percent of the profits."
Doesn't sound too healthy.
But when it comes to mobile services, we want to have our cake and eat it too. We want universal coverage, more consistent connections, better data rates and competitive pricing. AT&T says the acquisition of T-Mobile will help it deliver on at least the first three demands. The T-Mobile assets would give it needed capacity, coverage and spectrum.
That can only be a good thing for corporate buyers. T-Mobile, after all, hasn't exactly been lighting the wireless world on fire in terms of investment and innovation, so in the right hands, these assets would become more significant.
AT&T customers would benefit, and even Verizon Wireless customers would welcome having a stronger alternative to turn to.
The danger, of course, is so few players amassing this much market control could reduce the need for price competition. But having three national players versus four, when the fourth was pretty far back in the pack anyway, won't have much effect on enterprise deal making.
The DOJ and FCC, however, will use that fear as a club to eke out concessions before they let the deal go through. For example, pundits expect AT&T will have to divest assets in local markets where the acquisition will drastically reshape the competitive landscape.
While it is impossible to say what the courts will decide, recent history would suggest an unwillingness to intervene (witness the failed effort to block the Oracle-PeopleSoft deal).
And look at what the last great telecom antitrust case wrought. The eight companies that were created in the 1984 divestiture of AT&T have largely regrouped to create AT&T and Verizon. These markets, it seems, have a habit of finding their own levels, regardless of what the government thinks.
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