AT&T and T-Mobile merger in jeopardy as Justice Department takes action
An AT&T and T-Mobile merger would mean 'higher prices' for customers, says the Justice Department, which is suing to block the deal. Is the AT&T and T-Mobile merger now a bust?
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Its complaint, filed in federal court in Washington, argues that T-Mobile is an important balancing force in the phone industry. Allowing AT&T to gobble up the smaller carrier, it says, would significantly disrupt competition.
“AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” says the complaint. “Thus, unless this acquisition is enjoined, customers of mobile wireless telecommunications services likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest than would exist absent the merger.”
An AT&T and T-Mobile merger would turn the No. 2 and 4 carriers into the market leader. AT&T currently enjoys 26.6 percent of the American mobile phone market, behind Verizon's 31.3 percent. However, once you add T-Mobile's 12.2 percent market share, the newly merged company would out outclass Verizon and eclipse Sprint's 11.9 percent. (While Sprint holds fourth place among mobile subscribers, it's third overall.)
"Such a merger would threaten the viability of Sprint – arguably the more aggressive of the top three wireless carriers in introducing new technology – and solidify the grip of two legacy Bell companies," says Peter Morici, professor at the University of Maryland's Smith School of Business, in a press advisory supporting the Justice Department's suit.
Mr. Morici refers to Sprint's well developed 4G WiMax network, its powerful line of smart phones (such as the upcoming Samsung Galaxy S II), and the way the carrier continues to offer an unlimited data package well after Verizon and AT&T have abandoned theirs.