Purchase of T-Mobile USA by AT&T
The merger of AT&T and T-Mobile USA was announced on March 20, 2011. On August 31, 2011, the Antitrust Division of the United States Department of Justice formally announced that it would seek to block the takeover, and filed a lawsuit to such effect in federal court.
AT&T announced its intention to buy T-Mobile USA for $39 billion from Deutsche Telekom. The deal comes with 33.7 million subscribers, making AT&T the largest mobile phone company in the United States. If the deal goes through AT&T would have a 43% market share of mobile phones in the U.S. making AT&T significantly larger than any of its competitors.
According to an industry analyst, after the introduction of the iPhone in 2007, T-Mobile USA began to lose lucrative contract customers, dropping to 78.3 percent of subscribers in 2010, compared to 85% in 2006. T-Mobile USA's high churn rate of 3.2% compared to 1.2% at Verizon Wireless and AT&T Mobility, the needed investments in network upgrades and spectrum purchases were too risky given the drop in contract customers, reinforcing Deutsche Telekom's decision to sell.
Regulatory review and Antitrust concerns (DOJ & FCC)
This merger must undergo a regulatory review that the two companies expect to take at least 12 months. The deal requires approval by the U.S. Department of Justice and the Federal Communications Commission. The FCC is handling the review under WT Docket No. 11-65.
If the merger is completed, AT&T will have a customer base of approximately 130 million users, making AT&T the largest wireless carrier in the United States. Regulators question the effects such a deal will have on both competitors and consumers, with critics stating the deal will likely increase prices for customers, with interest group Public Knowledge stating the merger would cause "higher prices, fewer choices, [and] less innovation". AT&T chief executive Randall Stephenson however stated that the merger would increase network quality and would lead to large savings for the company. AT&T stated it may have to sell some assets to gain approval from regulators, but that they have done their "homework" on regulations.
FCC's 180-day countdown timer
The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on the acquisition of T-Mobile USA by AT&T in May. During the hearing senators questioned the companies CEOs on the effects of the merger on competition and other issues. At one point during the hearing the two companies denied that they were competitors.
Sen. Amy Klobuchar asked if AT&T was prepared to offer its customers T-Mobile's current pricing plans. Stephenson said AT&T would honor existing T-Mobile contracts, even when customers renewed, as long as they bought similar phones.
Gigi Sohn, president of Public Knowledge, testified at the hearing. Sohn stated that at least 1,000 people had signed the group's petition opposing the merger and that more than 5,000 people had written to the Federal Communications Commission opposing the deal.
Reaction to the announced merger has generated both support as well as opposition among various groups and communities.
The merger has garnered support from a wide number of civil rights, environmental, and business organizations. These include the NAACP, League of United Latin American Citizens, Gay & Lesbian Alliance Against Defamation (GLAAD), and the Sierra Club. Labor organizations such as the AFL-CIO, Teamsters, and the Communications Workers of America also voiced support for the merger. These organizations point to AT&T's commitment to labor, social, and environmental standards. Many of these organizations have also cited how the merger is likely to accelerate 4G wireless deployment, thus helping underserved communities such as rural areas and disadvantaged urban communities. According to the NAACP, the merger will "advance increased access to affordable and sustainable wireless broadband services and in turn stimulate job creation and civic engagement throughout our country."
As of August 2 the governors of 26 states have written letters supporting the merger. On July 27 the attorneys general of Utah, Alabama, Arkansas, Georgia, Kentucky, Michigan, Mississippi, North Dakota, South Dakota, West Virginia, and Wyoming sent a joint letter of support to the FCC. As of August 2011 state regulatory agencies in Arizona and Louisiana have approved the acquisition.
A diverse group of industry and public-interest organizations are opposed to AT&T's merger with T-Mobile. While AT&T's chief executive, Randall Stephenson, has expressed his confidence in the deal being approved based on the benefit to the public of expanding wireless access and relatively robust competition in the wireless market, analysts say the deal stands a good chance of being rejected by federal regulators.
Consumer groups including Public Knowledge, Consumers Union, Free Press and the Media Access Project are publicly opposed to AT&T merger. These groups have influence with Democrats at the Federal Communications Commission and in Congress. These organizations fear that the merger will raise prices and stifle innovation by consolidating so much of the wireless industry in one company. Free Press and Public Knowledge have started letter-writing campaigns against the deal.
Internet companies are generally skeptical of the merger because it leaves them with fewer counter-parties to negotiate with for getting their content and applications to customers. The AT&T merger might leave them dependent on just two: AT&T and Verizon. The Computer & Communication Industry Association (CCIA), which counts Google, Microsoft, Yahoo and eBay among its members, is opposed to the merger. "A deal like this, if not blocked on antitrust grounds, is of deep concern to all the innovative businesses that build everything from apps to handsets. It would be hypocritical for our nation to talk about unleashing innovation on one hand and then stand by as threats to innovation like this are proposed," said Ed Black, head of CCIA.
The Rural Cellular Association (RCA), a trade group representing roughly 100 mobile carriers located in rural areas, has expressed its opposition to the proposed merger between AT&T and T-Mobile. The RCA said that the merge would stifle competition, harm innovation, and lead to higher prices.
Effects on consumers
AT&T and T-Mobile use different 3G radio frequencies on their wireless networks. This could mean that T-Mobile customers would need to eventually replace their 3G phones. Some users are declining to upgrade their phones due to this issue. AT&T has admitted that it plans to shift T-Mobile users over to a different 3G frequency and that T-Mobile users will need to buy new phones. AT&T claims that this shift will be spread over several years to allow consumers to replace phones at the time they normally would do so.
- ^ "U.S. Files to Block AT&T, T-Mobile Merger". 2011-08-31. http://www.bloomberg.com/news/2011-08-31/u-s-files-antitrust-complaint-to-block-proposed-at-t-t-mobile-merger.html. Retrieved 2011-08-31.
- ^ a b "AT&T to Buy T-Mobile USA for $39 Billion". New York Times. 2011-03-20. http://dealbook.nytimes.com/2011/03/20/att-to-buy-t-mobile-usa-for-39-billion/?hp. Retrieved 2011-03-20.
- ^ AT&T Buys T-Mobile: Great For Them, Bad For You
- ^ O'Brien, Kevin J. (2011-03-21). "How the iPhone Led to the Sale of T-Mobile USA". The New York Times (The New York Times Company). Archived from the original on 2011-04-27. http://www.webcitation.org/5yH7HeJVk. Retrieved 2011-03-21. "“The iPhone effect cannot be underestimated in this decision,” said Theo Kitz, an analyst at Merck Finck, a private bank in Munich. “Without being able to sell the iPhone, T-Mobile was in an unsustainable position and T-Mobile USA became a problem child.”"
- ^ CAROL WERSICH (23 March 2011). "AT&T deal offers economics lesson". Evansville Courier & Press (Indiana).
- ^ "AT&T: T-Mobile deal good for consumers". Sacramento Business Journal (California). 22 March 2011.
- ^ BBC.co.uk
- ^ http://www.viodi.com/2011/08/26/fcc-restarts-180-day-clock-on-att-t-mobile-merger-cutting-through-all-the-hype/
- ^ a b c "AT&T, T-Mobile CEOs tell senators they aren't competitors". New Mexico Business Weekly (Albuquerque). 12 May 2011.
- ^ a b c German, Kent. "On Call: Civil rights groups line up behind AT&T-T-Mobile merger". CNET. http://www.cnet.com/8301-17918_1-20070630-85/on-call-civil-rights-groups-line-up-behind-at-t-t-mobile-merger/?tag=mncol;txt. Retrieved 17 August 2011.
- ^ a b German, Kent. "States weigh in on AT&T-T-Mobile merger". CNET. http://www.cnet.com/8301-17918_1-20070911-85/states-weigh-in-on-at-t-t-mobile-merger/?tag=mncol;txt. Retrieved 17 August 2011.
- ^ a b c Sara Jerome (23 March 2011). "T-Mobile, AT&T merger to draw torrent of opposition". The Hill.
- ^ Dexter Thillien (26 April 2011). "RCA Opposes AT&T/T-Mobile Merger". Global Insight.
- ^ MICHAEL J. de la MERCED, AZAM AHMED, and EVELYN M. RUSLI (29 March 2011). "Dealbook Online". The New York Times.
- ^ Steve Alexander (22 March 2011). "T-Mobile users fear rate increase". Star Tribune (Minneapolis, MN).
- ^ Richard L. Rosen. "Re: Notice of Exparte Presentation". http://www.broadbandreports.com/r0/download/1678331~018ee90413e657e412818181a5d840ff/DOC.pdf. Retrieved 22 August 2011.
- ^ Karl Bode (17 August 2011). "Leaked AT&T Letter Demolishes Case For T-Mobile Merger". http://www.broadbandreports.com/shownews/Leaked-ATT-Letter-Demolishes-Case-For-TMobile-Merger-115652. Retrieved 22 August 2011.
- WT Docket No.11-65, Federal Communications Commission, Office of General Counsel, Transaction Team
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