The U.S. Dept. of Justice (DOJ) wants to stop AT&T’s proposed $39 billion merger with T-Mobile. But what we all should be asking now whether or not this means the deal is off, or are we headed for a big legal battle?
Knowing what we do about AT&T and the DOJ, at this point it’s really anyone’s guess. We have really not seen this kind of lawsuit before so it’s hard to predict what’s ahead. But I can say one thing for sure; it’s going to be a bumpy road for everyone involved.
The fact that the DOJ wants to prevent this merger means a settlement isn’t going to happen anytime soon. And in fact, a merger is perhaps very unlikely, at least that is what many lawyers and law professors have been saying since the DOJ issued AT&T with a sucker punch yesterday issuing an antitrust lawsuit only five months after the deal was announced.
Currently, the DOJ points out, the four nationwide providers account for more than 90% of the mobile wireless connections in the United States, with AT&T and T-Mobile competing head-to-head in 97 of the nation’s largest 100 cellular marketing areas.
I guess you could say that the DOJ is worried that the merger would create, from a technology standpoint, a monopoly of sorts of the GSM carriers, as the proposed merger would create only one. This in turn would create a sole rival against the CDMA networks of competitors Verizon and Sprint in the U.S.
The nation’s No.2 carrier was feeling pretty good about the merger, but was getting a lot of opposition from the likes of Sprint and even associations like TIA (Telecommunication Industry Assn) which was very vocal about its objection to the merger.
Overland Park-based Sprint, led by full-court press of complaints from CEO Dan Hesse, argued that combining the two carriers would be bad for consumers. Sprint claims its lobbying efforts are not about negotiating the conditions of the merger, but that the government shouldn’t approve the deal. Sprint’s Hesse has also been very vocal, saying that this merger could destroy competition that leads to improved service and lower prices.
If the acquisition falters, Germany’s Deutsche Telekom AG stands to gain $6 billion in cash and additional spectrum which could drastically help T-Mobile, the fourth largest U.S. carrier. However, in reality, it appears the parent company isn’t really committed to supporting T-Mobile in the long term so what that means is that the company will likely seek out a new buyer.
In the end, we are really just back to the beginning. Is all the legal wrangling really going to be worth it? The hard part will be going to court and fighting the ongoing legal battle. It takes time, money, and lots of resources. And that means taking your eye of the prize. And the prize is serving customers. AT&T has said it will fight the case. I am sure they will try to expedite this as much as they can. But in the end it will still be a long and expensive battle. The big question looming is whether it is all worth the time and gamble. Only AT&T can tell us that.