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WhenAT&T announced earlier this year that it wanted to acquire T-Mobile USA from Deutsche Telekom for $39 billion, many spoke out against the move. Lawmakers were especially outspoken, saying the deal would hurt competition and potentially cause dramatic shifts in the wireless industry that could eventually prove troublesome for consumers.
Of course, AT&T and T-Mobile USA saw it differently. The companies believed that their merger would benefit the industry and consumers alike. Other lawmakers supported this view and lauded AT&T’s claims that the merger would actually generate thousands of new jobs.
More importantly, AT&T and T-Mobile argued that the deal could actually bring prices down to some extent, since economies of scale and reduced expenses could help the company pass its savings on to customers.
But the U.S. Department of Justice and the Federal Communications Commission disagree. The Justice Department has filed an antitrust suit to block the merger, and anFCC staff report came out against wireless license transfers that were essential for the deal to go through. The FCC action prompted the wireless carriers to withdraw the license transfer applications.
As much as AT&T and T-Mobile would argue the point, the merger was bad news from the beginning. And consumers should be more than happy that the deal is close to a final collapse. Read on to find out why:
1. It would hurt competition
If the AT&T, T-Mobile deal is approved by federal regulators, it would undoubtedly hurt competition. AT&T would have a dominant number of subscribers on its service, and all other competitors would trail far behind. Even worse, it would control all GSM networks in the United States. That alone would be anti-competitive.
2. Prices could rise
Although AT&T and T-Mobile said prices would not rise if there is a merger, that doesn’t seem to ring true. The companies acknowledged in their filings with the U.S. government that, at least in the short term, costs would rise. There’s also the issue of handling phone contracts, determining which cell towers to keep in operation and more. Simply put, costs would skyrocket-and AT&T would be hard-pressed to not eventually pass those additional costs on to consumers.
3. Too much power is a bad thing
As noted, AT&T would be the most dominant wireless carrier the U.S. has ever seen. The chances of the competition catching up would be nil. Over the years, when has a single, dominant company been good for consumers? Too much concentrated business power is a bad thing when it comes to business. It’s good to see the Justice Department and FCC stand up for robust competition in the wireless market.
4. What happens to Sprint?
One of the more disconcerting realities of a post AT&T, T-Mobile world is that Sprint would be relegated to the margins of the wireless industry. At the end of the last quarter, Sprint had a total of 53 million subscribers. AT&T, on the other hand, had over 100 million. Add that figure to T-Mobile’s 33.7 million customers, and it’s clear Sprint would mean very little in the wireless space if the merger happens.
Smartphone Makers, Customers Squeezed in Consolidated Market
5. Further consolidation would be a possibility
But there’s more to Sprint than just how it would be dwarfed. For one thing, it is quite possible that Verizon would respond by acquiring Sprint to get closer to the size of AT&T. In that scenario, the U.S. wireless market would only have two competitors, a concentration of market power that could only harm wireless users. Further consolidation was a near certainty if theAT&T, T-Mobile deal didn’t fall off the rails.
6. AT&T leaves much to be desired
Let’s take a quick look at AT&T. Sure, the company has the iPhone and it’s huge, but the quality of its service has frequently been slammed by customers. What’s more, it hasn’t necessarily been so warm with Android handset makers, and its 4G rollout has been sluggish, to say the least. Simply put, AT&T has a lot of issues. So, why should anyone want to see it become the dominant force in the industry?
7. What about the phone makers?
As noted, AT&T hasn’t always had the best relationship with Android vendors. But it goes beyond that. If AT&T is allowed to merge with T-Mobile, handset vendors would lose a lot of market leverage, since they would need to deal with a merged wireless giant to sell their devices at a profit. AT&T would have all the leverage. And that’s not a good thing.
8. It could consolidate Apple’s power
Following on the vendor theme, it’s important to remember that Apple is a major AT&T partner. If AT&T and T-Mobile combine forces, Apple would start selling the iPhone to T-Mobile customers by default. That could further consolidate its power in the mobile space. Having the iPhone available on all major carriers would likely greatly shrink the potential market for the rest of the smartphone makers.
9. Customer service woes
Whenever two major companies combine to control a large majority of a market, it’s rare that the new firm will provide ideal customer service. That especiallywon’t happen if AT&T and T-Mobile combine forces. Both companies are widely viewed as some of the worst providers of customer service in the market. If they merge and are forced to go through the logistical nightmare of bringing two big companies together, how much worse would their customer service be?
10. Where is the added value to consumers?
At the end of the day, value to consumers is what needs to trump all other considerations in a merger proposal. Over the last several months, neither T-Mobile nor AT&T has made a solid argument for why the deal is good for consumers. Today’s customers already have enough phone and service choices, and prices are in line with their expectations. What can a combined AT&T and T-Mobile do that the companies couldn’t do separately? Don’t know? Yeah, neither do they.