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The Downside of AT&T Going It Alone


Fearing that less competition would lead to higher prices, some consumers may breathe a sigh of relief if AT&T’s planned $39 billion takeover of T-Mobile collapses. But analysts say it’s not necessarily all good news for customers.

On Thursday, AT&T and Deutsche Telecom, which owns T-Mobile, pulled their merger application to the Federal Communications Commission to focus on a forthcoming trial with the Department of Justice, The Wall Street Journal reports. A merger could mean fewer choices for consumers: AT&T and Verizon already have 65% of industry sales in the U.S., according to Bernstein Research.

However, existing AT&T and T-Mobile customers would – in theory – also benefit from the two companies combining their technology, analysts say. “If the deal does not go through, we will likely get lower prices, but also lower quality of services, coverage and bandwidth,” says Scott Sutherland, a senior analyst with Wedbush Securities. AT&T has previously had issues with dropped calls.

AT&T and T-Mobile did not respond to requests for comment.

As we previously reported when the deal was first announced in March, the planned acquisition of T-Mobile was seen as a boon for those without an annual contract: prepaid and pay-as-you-go customers. In the event of a merger, some analysts expected AT&T to turn T-Mobile into a more mainstream, premium prepaid brand. Currently, prepaid customers have less choice of apps and phones.

On the upside, most experts agree that the more independent operators there are, the lower prices will be. Verizon and AT&T outsize Sprint Nextel Corp. and T-Mobile USA, the next biggest wireless carriers, and leave Clearwire Corp., Leap Communications and MetroPCS Communications Inc. in the dust. The merged AT&T/T-Mobile entity would have 130 million users.


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    • By WebOsPublisher

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    • Snippets from CNN story …

      AT&T lobbyists push for T-Mobile deal

      For years, AT&T has been one of the biggest political and lobbying forces in Washington, D.C. Last year, it spent $15.3 million and had 93 lobbyists on its roster, including six former lawmakers. Germany’s Deutsche Telekom spent $3 million on lobbying for T-Mobile USA in 2010, armed with 41 lobbyists and one former lawmaker.

      Many lawmakers have a personal interest in seeing AT&T do well. AT&T ranked as the sixth most popular investment among members of the House and Senate in 2009, the most recent year for which such data is available, according to the Center for Responsive Politics.

      And AT&T is considered a heavy hitter during campaign election cycles. In 2010, donors with links to the company made nearly $4 million in campaign contributions to candidates running for federal office.

    • According to the report “Corporate Taxpayers & Corporate Tax Dodgers 2008-10,” two of the 25 companies with the largest total tax subsidies were AT&T at #2 ($14.5 billion) and Verizon at #3 ($12.3 billion). Also, there were 30 corporations that paid less than nothing in aggregate federal income taxes over the same period. These 30 companies, whose pretax U.S. profits totaled $160 billion over the three years, included Verizon. The report states the laws that allow this were not enacted in a vacuum, but rather were adopted in response to relentless corporate lobbying, threats and campaign support.

    • Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24×7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly — the American consumer. This is how AT&T and Verizon fashion themselves as brilliant … with their political use of money.

      Taking into account the whole U.S. market, a combination of AT&T and T-Mobile would increase the Herfindahl-Hirschman Index (HHI), a widely accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.

      If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so beware of how things could “mysteriously” turn in this case.

      “It’s only a slight overstatement to say that if they weren’t going to block this one, the Justice Department might as well just throw the antitrust guidelines out the window,” said Herbert Hovenkamp, professor of law at the University of Iowa, who is considered by many to be the dean of American antitrust law. “This merger clearly seems to violate them.”

    • There is no downside to AT&T going it alone. The employees they would have fired will remain employed and that will benefit them and the economy.

      If anything, having more customers would allow the customers complaining about dropped calls to be ignored. With a smaller customer base, they have the opportunity to be heard.

      AT&T business must be good indeed in order to promise $4,000,000,000 to T-Mobile in case the deal fell apart.

      Finally, our government stood up for the consumer. I’m sure heads will roll.

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.