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T-Mobile USA and AT&T's CEOs will defend the proposed merger of their networks before the U.S. Senate today.  (Source: AP Photo)

The deal would reduce the number of big nationwide carriers to three. With Sprint in danger of failing, customers could soon be left with only two options.  (Source: Politico)
Consolidation would only leave three large players on the market

AT&T, Inc (T) hopes to soon complete an acquisition of Deutsche Telekom AG's (DTE) T-Mobile USA.  But to get there, the companies have to navigate through a Congressional inquiry -- which occurs today -- regulatory hurdles set up by a number of government agencies, and strong opposition from smaller rivals.

I. Birth of a Duopoly

The move would unify T-Mobile's 32.3 million subscribers with AT&T's 97.5 million subscribers to form the nation's largest carrier, easily surpassing Verizon Communications, Inc.'s (VZ) 104 million subscribers.  Together, Verizon and AT&T would have 80 percent of contract cell phone customers in the U.S.

The move would leave the struggling Sprint Nextel Corp. (S) with 51 million customers as the only alternative to Verizon/AT&T.  Sprint Nextel is viewed as a potential acquisition target as well.

Before AT&T can complete its purchase, it must gain approval from the U.S Federal Trade Commission (FTC), U.S. Department of Justice (DOJ), and U.S. Federal Communications Commission (FCC).

II. Congressional Inquiry

The road to that approval begins today in a special Congressional hearing on the deal.  AT&T Chief Executive Randall Stephenson and T-Mobile USA CEO Philipp Humm will have to defend the acquisition before the U.S. Senate's antitrust subcommittee.  

The Senate does not have power to approve or reject mergers, but it wields control over the DOJ and FCC to execute its objectives.  According to a Reuters report, staffers point to loss of competition and jobs as two key concerns for federal officials.

AT&T and T-Mobile vigorously promoted the alleged merits of the deal, saying it will provide faster data service to customers on both networks, and better voice network coverage.  They also argue it will allow them to use their collective spectrum more efficiently at a time when spectrum is at a premium.

Both companies have opted to shirk the expense of deploying true 4G networks now, instead opting to rebrand 3.5G HSPA+ as "4G".  Current HSPA+ deployments fall far short of the promised spec, much like current true 4G deployments by Sprint and Verizon.  Thus the incomplete HSPA+ "4G" remains slower in most tests than Verizon/Sprint's incomplete true 4G.

III. Mounting Opposition

The merger has a number of high profile opponents, including Sprint Nextel, Cellular South, and public interest groups.  They say the rise of two super carriers would allow for tactics that would force smaller competitors out of the market.  Sprint spokesman John Taylor comments, "We continue to believe that this transaction would be bad for consumers, bad for the wireless industry and bad for the economy."

The DOJ will evaluate antitrust concerns and the FCC will evaluate public interest issues.  The FCC is reportedly already growing concerned about the merger after a record number of T-Mobile subscribers jumped ship in Q1 2011 and sent it over 4,800 complaints about the proposed deal.  FCC Commissioner Michael Copps says the deal "may be an even steeper climb" than the controversial Comcast Corp. (CMCSAacquisition of NBC Universal.  Mr. Copps voted against that approval, but was narrowly defeated when the deal was approved in January by a 4-1 vote.

In an odd display, T-Mobile continues to air attack ads against AT&T, criticizing its "slow" networks.  The ads depict spokeswoman Carly Foulkes sympathizing at the plight of her friend "iPhone", who is forever burdened by his partner "AT&T".  The ads perhaps display that even T-Mobile's leadership on some level believes that the deal won't be approved. 

In related news, Verizon and AT&T are battling the U.S. FCC to try to prevent new rules that could force them to open their towers to smaller players.  Similar rules, backed by U.S. law exist with landline phones and cable internet connections, but do not apply to cellular providers.



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RE: And don't forget
By Targon on 5/11/2011 1:17:51 PM , Rating: 3
Considering that Verizon has been buying up companies left and right for the past few decades to become the huge company they are now, plus the way Verizon has a lock on landline service in many areas(which gives it land for cell phone towers), I don't see that the AT&T/T-Mobile merger is all THAT bad. Why have you not said anything about Verizon for the past few decades?


RE: And don't forget
By nolisi on 5/11/2011 1:48:56 PM , Rating: 3
quote:
I don't see that the AT&T/T-Mobile merger is all THAT bad. Why have you not said anything about Verizon for the past few decades?


Who says no one said anything? There were customers from Alltel and other smaller regional carriers who likely didn't want to go to Verizon, but the number of complaints during these acquisitions (given the size of the acquisitions) did not merit antitrust investigation. It's not that nothing was said, it's just that numbers didn't warrant action.

The purchase of T-Mobile, a regional carrier that has successfully grown to a national carrier in spite of the giants owning the playground is bound to spark some issues because of the size of the acquisition- the number of complaints and customers leaving T-Mobile is evidence of this.(including myself). Keeping my service with T-Mobile is both a testament to the great customer service I've recieved as well as a statement against the business practices of Verizon, AT&T and Sprint.


RE: And don't forget
By omnicronx on 5/11/2011 2:15:01 PM , Rating: 2
You are kind of missing the point. While everything you say about Verizon is true, there were still 4 major providers even with its massive acquisitions.

The AT&T T-mobile merger will essentially leave the industry with a mere 2 major players.

This is where his comment stems from, they split up AT&T in the 80's to allow for MORE competition. (in which at the time AT&T controlled almost all of the market)

While I do see your point, I don't truly see the relevancy here. Verizon was mainly buying up local smaller carriers, not over 1/4 of the entire US market. Furthermore there were still 3 other major competitors in the marketplace. As previously stated, this AT&T move will essentially bring that number down to two.. (who knows how much longer Sprint will last if this merger goes through, my guess is not too long)

This is counter productive, and even big business proponents will be hard pressed to detail how this could be possibly good for consumers. Please remember that most carriers in the US already hold a virtual monopoly in their prospective areas in the first place. This is only going to further worsen the cause.


RE: And don't forget
By Reclaimer77 on 5/11/2011 3:01:25 PM , Rating: 1
quote:
This is counter productive, and even big business proponents will be hard pressed to detail how this could be possibly good for consumers.


Why is that? The consumers are to blame. If more had picked T-Mobile, we wouldn't be having this discussion would we?

I love how everyone discusses this like it's optional. It really isn't. T-Mobile can merge now, while they are still relatively valuable. Or they can continue to watch their position decline and more and more people choose the bigger better carriers over them. Eventually they'll be facing having to sell at a MUCH lower price, or file bankruptcy.

Better to merge now while they still have a leg to stand on and can negotiate a better deal from a relatively strong position, rather than one of desperation.

Tell me omni, what would you have them do?


RE: And don't forget
By Wolff317 on 5/25/2011 1:59:46 PM , Rating: 2
How do we know the will go down in the future? Plus I believe it would be like when Sprint aquired Nextel, at that point is where Sprint Customer Service TANKED and BEHOLD! bigger Verizon and AT&T and T-Mobile.
I would love to have that Crystal Ball of yours, maybe you foresaw the lack of payraises for our Military and Vets while they got thiers. Sorry wrong Site for that discussion huh?


RE: And don't forget
By Wolff317 on 5/25/2011 2:01:05 PM , Rating: 2
How do we know the will go down in the future? Plus I believe it would be like when Sprint aquired Nextel, at that point is where Sprint Customer Service TANKED and BEHOLD! bigger Verizon and AT&T and T-Mobile.
I would love to have that Crystal Ball of yours, maybe you foresaw the lack of payraises for our Military and Vets while they got thiers. Sorry wrong Site for that discussion huh?


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