US Justice Surprises Everyone, Raises Objection To AT&T – T Mobile Deal

The US Justice Department has finally come out and raised an objection to the AT&T merger with T-Mobile US. It will now have to prove that its fears are justified in a long running anti-trust case, which could take years. AT&T says it wants a fast hearing, but is unlikely to be granted it. In fact the whole idea of raising an anti-trust complaint may be to give everyone more time.

Focal Points:

• At the very least this action has put the deal in jeopardy and make it less attractive to both AT&T and T-Mobile USA. At the worst the deal could end up being blocked, and T-Mobile, if it experiences widespread customer erosion, which seems likely, may decide that its fate lies elsewhere.
• The effects on our community – pay TV and video, are that T-Mobile‘s parent Deutsche Telekom, in Europe will have now not have a $39 billion cash boost which it has said it would partly use to buy European IPTV and fixed line operators and the continued high level of competition in wireless in the US will continue and stretch to new content and wireless broadband services, rather than slowing down to a leisurely pace as the market consolidated. There‘s a chance that this will stimulate video efforts such as the emergence of ATSC M/H mobile broadband TV, used as a competitive wireless weapon.
• The Justice Department filed the suit in US District Court in Washington, DC and issued a statement, which said that it did it in order to keep cellular services competitively priced. After the merger it was worried that tens of millions of consumers in the US would face higher prices, fewer choices and lower product quality. If AT&T had never been worried about competition, the iPhone exclusive may never have happened and the device itself may have had less impact.
• If the deal is called off T-Mobile will reap a $6 billion penalty payment from AT&T, and the folly of going after such a deal, under a relatively liberal administration, may have consequences for senior AT&T executives. That loss of cash might also have an effect on the cash available for AT&T to continue U-Verse build out at its current rate.
• The Justice Department said that AT&T and T-Mobile currently compete head-to-head in 97 of the nation‘s largest 100 cellular markets and concluded that if the merger was to proceed, three providers would have 90% of the US market.

Editor’s Note: In a recent you tube video, the CEO of Sprint, Dan Hesse, talks about the merger of T-Mobile and AT&T. Experton Group agrees that the Sprint/T-Mobile merger comments made by Dan are more realistic than AT&T merger. In our opinion, the Sprint/T-Mobile merger would also create a more balanced market.