Is AT&T's Bid For T-Mobile Anti-Competitive? 6 Ways to Look at the Issue

It’s hard out there for a telecommunications giant. After the Justice Department officially filed a lawsuit on August 331 to block AT&T’s (T) proposed merger with T-Mobile, seven states have now chimed in with their opposition to the deal.

In a bipartisan show of anti-merger sentiment, New York, California, Massachusetts, Washington, Ohio, Pennsylvania and Illinois joined the federal government in an amended complaint filed September 16 in Washington that argued that the $39 billion deal would be anti-competitive. Sprint Nextel (S), which stands to lose the most if the deal go through, also filed its own suit to block the merger.

AT&T’s takeover of T-Mobile USA from Deutsche Telekom would combine the second- and fourth-largest wireless carriers in the US, and the new entity would have a subscriber base one-third larger than Verizon's (VZ) and twice as big as Sprint’s.

Does an AT&T and T-Mobile merger violate antitrust laws? Judges in federal district court in D.C. will make the decision next year, with AT&T pushing for an earlier start date of January 16 for the trial while the Justice Department is targeting March 19.

There are four scenarios that could play out in this case, as summarized by Mashable.

1. Department of Justice wins its case and blocks the AT&T merger.
2. AT&T wins its case and the merger moves forward.
3. AT&T withdraws its acquisition before a decision is rendered.
4. AT&T and the Department of Justice settle the case, and the merger moves forward with conditions.

Whatever the outcome, the proposed merger has unsurprisingly gathered a cloud of controversy, with key players and newsmakers offering arguments both for and against the deal. Some have vested interests; some stand for the public interest. Here’s a look at some of the views that dominate the landscape.


The Pro-Competition, Pro-Consumer View
Responsible for enforcing antitrust laws since the Sherman Act of 1890 came into effect, the Justice Department is no stranger to battling large, multinational corporations. In fact, it has gone against AT&T for antitrust reasons before in 1974, which eventually lead to the 1984 Bell System divesture. The federal agency put out a press release which argues in this case that the AT&T buyout of T-Mobile would lead to price increases for customers and loss of innovation.

“The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the facing higher prices, fewer choices and lower quality products for mobile wireless services,” said Deputy Attorney General James M. Cole. “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

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.

Read more here.


The Actually-Bigger-IS-Better Argument
AT&T responded to the official suit filed by the Justice Department with a 27-page rebuttal, reported Dealbook, which asserted that its attempted takeover of T-Mobile would spur development of the wireless industry because of greater engineering efficiencies, and that there would be healthy competition in the industry even if the merger takes place.

As expected, AT&T argued that combining with T-Mobile would give it the spectrum it needs to expand its next-generation wireless network. It also contended that the Justice Department overlooked other sources of competition in the cellphone service industry, including regional companies like U.S. Cellular and smaller national players like MetroPCS.

AT&T also said that T-Mobile was a fading competitor that was losing subscribers, and that its corporate parent, Deutsche Telekom, was unwilling to continue investing in the United States.

Click here for more.


The Make-Them-Do-The-Work View
It’s not surprising that Sprint CEO Dan Hesse has been working hard at blocking the deal, given the threat it poses to his company’s existence. According to Mobiledia, Hesse has made numerous trips to Washington to testify before Congress and has sought support from lobbyists, consulting groups and other companies. Sprint asserts that AT&T could resolve its spectrum shortage through a myriad of other measures.

AT&T could see a 600 percent network capacity boost by 2015 through other means that, Sprint argues, are more typically used by carriers coping with increased data traffic. Such measures would cost much less than the $39 billion AT&T plans to pay for T-Mobile, according to the carrier.

"AT&T could increase its capacity by developing its warehoused spectrum, accelerating its 4G network buildout, and implementing a more efficient network architecture, just as other wireless carriers around the world are doing today," Sprint said in a statement.

For more, click here.

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