Feds aim to block AT&T's T-Mobile purchase: The fallout

Feds aim to block AT&T's T-Mobile purchase: The fallout

Summary: The Feds want to block AT&T's acquisition of T-Mobile. Here's a look at the winners and losers.

SHARE:
TOPICS: AT&T, Telcos
166

The Justice Department filed to block AT&T's planned acquisition of T-Mobile and the news is going to shake up the wireless industry.

AT&T portrayed its acquisition of T-Mobile as a way to boost 4G services, build out its network, alleviate a wireless spectrum crunch and boost jobs. AT&T just Tuesday said it would repatriate 5,000 call center jobs to the U.S.

The Department of Justice, however, is wary of having two companies control 80 percent of the postpaid wireless market and wants more consumer choice. What's unclear at this juncture is whether the complaint filed by regulators on Wednesday is an opener to prod AT&T to divest assets too close the T-Mobile deal or a nail in the merger coffin. AT&T will have an appeal.

Also: U.S. Justice Dept. moves to block AT&T, T-Mobile merger

According to the DOJ:

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction. The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers. Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

Deputy Attorney General James Cole said at a press conference:

The Department filed its lawsuit because we believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services.

For now though it's worth handicapping the key winners and losers.

Winners

Sprint comes out ahead. Sprint was one of the more vocal opponents of the AT&T purchase of T-Mobile. While AT&T CEO Randall Stephenson said the AT&T acquisition was patriotic and would bolster U.S. competitiveness, Sprint said the deal was a land grab that would consolidate power. Simply put, Sprint would have had a tough time competing as a distant No. 3. Now that picture looks better. Sprint would still be No. 3, but could grab more customers from a now weakened T-Mobile. Wall Street pushed Sprint shares about 7 percent higher on the news.

Verizon will remain top dog. Verizon is likely to take advantage of the T-Mobile distraction for AT&T and can also poach customers from T-Mobile. Meanwhile, AT&T will now have to spend more on its network and acquire more spectrum to broaden its 4G footprint.

Consumers also may gain. T-Mobile was a down market carrier in many respects and was playing with a value pricing model. It was possible that AT&T would allow T-Mobile to keep its identity, but over time it would have been absorbed. Consumers may garner good deals as T-Mobile moves heaven and earth to keep current customers and attract new ones.

Losers

T-Mobile may be doomed. It's hard to see a scenario where T-Mobile comes out ahead. Without an exit, T-Mobile is a No. 4 carrier that is losing customers each quarter. With Sprint increasingly more competitive and AT&T and Verizon domination continuing, it's unclear what T-Mobile can do. A merger with Sprint could be possible, but the networks are on different technologies.

Deutsche Telekom gets consolation prize, but little else. If AT&T-T-Mobile deal falls apart, Deutsche Telekom gets a $3 billion consolation prize in a breakup fee. AT&T was very cocky about getting regulator approval to agree to such a massive fee. In the short-term, Deutsche Telekom gets a nice wad of cash. However, Deutsche Telekom still has to figure out what to do with T-Mobile in the long run.

AT&T will need to invest more. AT&T doesn't need T-Mobile per se and will be fine without the acquisition. However, AT&T needs more wireless spectrum and needs to expand its network footprint. The T-Mobile deal would have ultimately saved AT&T some dough on a network build-out.

Related:

AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

Topics: AT&T, Telcos

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

166 comments
Log in or register to join the discussion
  • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

    Very good decision. I use AT&T and in my area it is the only one that gives me not so great speeds when compared to Verizon. This forces them to invest more and get things like this straightened out. I also use Sprint but the 4g never happened here even though next street gets it. They also needs to straighten themselves before bickering over competition.
    Ram U
    • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

      @Rama.NET While I agree with AG Cole's statement that " the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services" I am not a believer at all that AT&T will invest more in their own network to improve their product.

      The business model of most US Corporations at this point has been demonstrated to be Shareholders first, Coporate Management next, staff and customers last. Any improvement AT&T makes to their product will cost consumers. Those improvements will only be made after the shareholders have been satisfied and Coporate Management has received their payout. My best guess is that AT&T will use the paid "support" of their allies in congress to secure some more money from the taxpayer prior to paying for the upgrade and re-investing their own profits.
      wperry@...
      • RE: to secure some more money from the taxpayer

        @wperry@...

        Ah, yes, another one <b>who gets it!</b>

        Faced with a choice to spend profits and stockholder dividends <b>or</b> taxpayer dollars on infrastructure needs; guess which way the C level execs are going to proceed.

        If you think <i>profits and dividends</i>, all I have to ask is: <b>"What planet are <u>you</u> living on"?</b>

        Privatize the gain, socialize the risk. Corporate business hard at work.
        fatman65536
    • This WAS their investment. If it falls through theyll have 3B

      less to invest in upgrading their network. And Deutsche Telekom isnt about to let that 3B stay in TMO in the US. They're done with investing in it. TMO will continue losing customers and keep declining in service until it folds up in a couple years. No consumers win if this falls apart. There still will be one less competitor when TMO is gone.
      Johnny Vegas
    • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

      @Rama.NET I love the commercials that point out how T Mobile customers would have been joining the network with the worst customer service ranking (AT&T) in the U.S. This can only be considered a temporary win for TMO customers, though. A bigger win will come when the iPhone is available on every network. Right now, people who want iPhones on TMO can only use nefariously obtained and/or modified phones. I hope that situation stabilizes before TMO calls it quits. Otherwise, like I said, it might be a temporary win.
      BillDem
    • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

      @Rama.NET

      Very important subject. Thank you and I subscribe you. <br>
      <a href="http://www.tuttube.net">tuttube</a> - <a href="http://www.tuttube.net/videolari/diziizle">dizi izle</a> - <a href="http://www.tuttube.net/videolari/filmizle">film izle</a>
      basvideoizle
  • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

    What do you know, the guvement once again knows what's right for business....

    What's next Boeing has to stop making airplanes because they moved production to another state??
    Hasam1991
    • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

      @Hasam1991 Perhaps if these US Corporations demonstrated even an ounce of concern for their customers and long term growth instead of quarterly reports, the government would not have to get involved.
      wperry@...
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @wperry@...

        Perhaps you can point to the section in the US Constitution that says the government is tasked with making sure "US Corporations demonstrated even an ounce of concern for their customers and long term growth instead of quarterly reports". Good luck with that, tiger.

        This is government overreach, pure and simple. They have absolutely no business deciding (absolutely arbitrarily) what is good for consumers in matters that do not involve physical harm. That is up to the consumer. The merger would not have created anything close to a monopoly (the only way you can have a monopoly that lasts for any significant amount of time is with government support), it is nothing more than a symptom of a maturing market. Yes, kids, consolidation happens in a maturing market. The weak (T-Mobile) get culled or bought, and the strong pick up market share. Then something comes along and revolutionizes everything, and the cycle starts all over again. If you think that the government helped you with this decision, you are a fool.

        At the end of the day, T-Mobile is still looking at going out of business. Now, instead of an orderly retreat and efficient use of resources, the government is going to force one company to fail in a messy way and another company to grow in a messy way. Money will be wasted all around, and the consumer will end up paying for it, and that wasted money will ensure that jobs that could have been created will not be created. But as long as we stick it to those evil corporations who don't "care," it's all good, right?
        aaronc0027
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @wperry@... Your statement is so true. This is one of the rare instances that I am in agreement with the US Government about something. Posting good short term numbers for the financial sector seems to the the most important thing on the agenda at most companies, no matter how it effects them long term.
        tgschmidt
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @aaronc0027... Not sure what the U.S. Constitution has to do with with this discussion. The Constitution clearly gives Congress the power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;" Consumer protection is one function of the FTC and the Justice Department, as part of the Executive Branch, certainly has the authority to legally question actions of corporations.

        If you think for a minute that AT&T and T-Mobile were planning to merge to provide you or any consumer with better service, you have not been an AT&T customer. Those of us who are or have been customers know better.
        lostark98
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @aaronc0027... Just who is looking out for us then? These large corporations that are sitting on trillions of dollars of cash? You really want these mega-corporations to self-police themselves?

        Do you really want to live in a country that does not look out for it's citizens and smaller businesses? Why don't you go move to Iraq - your ideas will fit right in over there.
        j28n
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @aaronc0027


        Wow, Apparently you never heard of Ma Bell. Where in the heck do you think that AT&T came from? it is one of the remaining strands of the original Ma Bell company from way back. If any company out there knows how to work a system it is going to be one that was in the game. Sure 80% isn't a monopoly, but it's a pretty safe bet to say that a company in that position pretty much calls the shots.

        In a way I do see your point about government oversight, but the constitution does provide that our government is supposed to do this. It's just a shame that the government isn't as well equipped to really handle mega corps, they are generally more suited to go after the little guy.

        Ya know the folks that have enough money to actually do something and not enough to stop someone from taking it from them.

        At any rate I think that this is a good idea to stop this merger simply because, in my opinion, AT&T ws simply trying to squash competition and provide the lowest possible service and selection with the highest possible price, I wouldn't be surprised to find that AT&T and Verizon have non-official agreements for pricing/ service etc and put on a good front of competition.
        spoonology@...
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @lostark98

        You don't know what the US Constitution has to do with it, and that is why you think that it's the federal government's business to step in and keep a market from working. Thanks for showing your ignorance and admitting that you think "customer satisfaction" is equated with "consumer protection" and is under the purview of the FTC.

        I am an AT&T customer voluntarily. I do just fine. The day I am no longer happy with them, I will look elsewhere. I don't need the federal government to protect me from bad customer service. That's not their job. If you think it is their job, you're part of the reason why this country is swirling down the crapper.

        The merger was designed to help T-mobile exit the market gracefully and AT&T expand it's infrastructure with existing systems. You know, conservation of resources and all that jazz. But apparently it's the government's job to tell T-mobile that they have to fail spectacularly and AT&T has to spend money to create redundant infrastructure.

        Anything else you need me to educate you on?
        aaronc0027
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @j28n

        "@aaronc0027... Just who is looking out for us then? These large corporations that are sitting on trillions of dollars of cash? You really want these mega-corporations to self-police themselves?

        Do you really want to live in a country that does not look out for it's citizens and smaller businesses? Why don't you go move to Iraq - your ideas will fit right in over there."

        Go look up the term "demagogue." Then look in a mirror. Then slap yourself.

        Are you incapable of looking out for yourself? Or are you just a platitude machine? Oy, I fear for the future of this country if people like this are allowed to vote.
        aaronc0027
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @spoonology@...

        "Wow, Apparently you never heard of Ma Bell. Where in the heck do you think that AT&T came from? it is one of the remaining strands of the original Ma Bell company from way back. If any company out there knows how to work a system it is going to be one that was in the game. Sure 80% isn't a monopoly, but it's a pretty safe bet to say that a company in that position pretty much calls the shots. "

        Yeah, no. Ma Bell was a government mandated monopoly. Such a thing cannot exist without government intervention. AT&T is winning the market. Do you think they can tick everybody off and keep 80% marketshare in perpetuity? Will you be forced to use their services? If they suck as bad as you ninnies say they do, they will bleed customers.

        "At any rate I think that this is a good idea to stop this merger simply because, in my opinion, AT&T ws simply trying to squash competition and provide the lowest possible service and selection with the highest possible price, I wouldn't be surprised to find that AT&T and Verizon have non-official agreements for pricing/ service etc and put on a good front of competition."

        Just because you have an opinion doesn't mean that you should embarrass yourself by sharing it. EVERY company is trying to squash the competition. It's called "competition" for a reason. EVERY company is trying to give you the fewest services for the most money they can get. It's called "economics." Do you work extra hours and do other people's jobs without asking for more money? No, you take every dime you can get from your employer for all of your work, just like companies take every dime they can get from customers for their service. This surprises you?

        If AT&T and Verizon have secret price fixing deals, that's called "collusion." That is highly illegal. If you have proof of it, please present it. Otherwise keep your ignorant opinions to yourself.
        aaronc0027
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @aaronc0027 <br><br>Uh, where did I even mention "customer satisfaction" vs. "consumer protection?" My first paragraph was to rebut your point that the Constitution does not give "the government" the ability to regulate markets. It is clear in the Constitution that Congress is given the power to regulate. You want to debate that point? I mentioned the FTC only to illustrate the fact that there are agencies in our government that do, in fact, regulate commerce. (BTW, there is no such thing as a "free market" in our economy.)<br><br>The second paragraph in my previous post was the tell you you're a bit naive to think that AT&T has any interest in providing you with the best consumer experience (I believe I said "service" and not "satisfaction." Two different things Smart Boy.) If you think AT&T cares one bit about how "gracefully" T-Mobile exits the market, you're not as bright as you think you are. Perhaps you would like to enlighten the rest of us on how you know so well what is the intent of the proposed merger. I do not ascribe any noble intentions to AT&T based on my experience with the company as my customer and also as their customer as a consumer.<br><br>Since you mentioned "customer satisfaction:" You may have had good experience with them so far, but try traveling outside your home and see how good they are. Yes, they're OK in the limited places you can get the signal, but even in major metropolitan markets, the service sucks. If you've ever had to get help from AT&T, getting what you need fixed the first time is like playing roulette. And trust me, if you need to travel internationally like I do, forget them. You're better off buying a temporary phone wherever you are.
        lostark98
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @aaronc0027: "But as long as we stick it to those evil corporations who don't "care," it's all good, right?"

        In your juvenile attempt to speak in sarcastic prick-talk, you accidentally sputtered out a fundamental Truth as pointedly poignant as any in existence. Yes, the average corporation operating today would not hesitate - indeed, would eagerly, even gleefully - sell your very soul to Satan (metaphorically speaking) if it meant *any* measurable increase to their bottom line. The employee is a rag bag of skill sets to be used and abused as much as inhumanly possible at as little cost as inhumanly possible to serve the one end of helping to make a very small percentage of amoral & obscenely greedy fat cats nothing but more and more filthy rich, while they keep the real backbone of that corporation underfoot with as near a subsistence level of income as possible.

        Realistically, there's next to nothing the average worker can hope to do about this brutal imbalance of power -- other than struggle to cope with feelings of frustration, anger, resentment & degradation -- not a mix of feelings one should be expected to endure at the hands of their employers on a daily basis.

        It's way past time for Labor Unions to rise up from the ashes to confront the vile and despicable nature of this abusive relationship and return some sense of dignity & power to the primary economic resource of this country -- the rank-and-file worker.

        . . . . . and stuff like that.

        God save the Queen.
        Lettuce prey,
        Ahhhhhhhhhhmen!!!
        humannzee
    • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

      @Hasam1991

      This may not be the best for AT&T, but I'm pretty sure it's best for me as a T-Mobile customer. I've been with AT&T in the past and hated it. T-Mobile has been a joy. Lower prices, better service and no complaints.
      4PSe5Cdk
      • RE: Feds aim to block AT&T's T-Mobile purchase: The fallout

        @4PSe5Cdk

        Well we're all glad that the government overstepped its bounds so that you can feel better about your phone service. After all, it's all about you.
        aaronc0027