The consequences of stopping the AT&T T-Mobile merger

November 24, 2011 | By | Reply More

AT&T has been trying to acquire T-Mobile for over a year now, with the deal being worth $39 billion. At first, the company was certain that it would get its way, even going so far as offering a very high default settlement, the money they would have to pay T-Mobile should the deal not go through. But since then, both the DOJ and the FCC have worked to prevent this deal from going through. But what would happen if the deal doesn’t work, and what are the consequences for customers?

The deal would be historical, as one of the biggest deals in history. It would also bring two of the biggest nationwide US cellular networks together, reducing the competition from 4 to 3 major networks. This last point is what’s behind the actions by the FCC to recently try and block the merger. In technical terms, the FCC chairman has been encouraging the other members to refer the deal to an administrative judge, or in other words, they want the deal to be seen by a court, and struck down. The reasons are simple, such as a fear of a lack of competition, and what would happen to customers of T-Mobile should they be added to the AT&T family. But there would be consequences if the deal doesn’t go through also. While AT&T hasn’t been threatening directly, it has provided hints that seem to indicate they would not innovate as fast if their deal was denied. This could impact their roll-out of the new LTE network. The reason seems to be a lack of spectrum space, although experts disagree on that.

Also, because they promised such as a high fee in case the deal doesn’t go through, they would have to pay that money off, which would likely come right out of their research or network maintenance budget. It probably wouldn’t come from their profits. These actions could of course have consequences on users, but whether the short term negative impact would be better or worse than the long term effect is hard to say. If T-Mobile was acquired, many suspect that Sprint would be next on the chopping block, and when competition vanishes, then historically companies have been less likely to innovate or drop prices. Competition is instead what drives companies to be better, in order to incite customers to use them. A strong, competitive T-Mobile is almost surely better for customers than none at all. If they too were to deploy a robust LTE network, that simply means more coverage for everyone.

Overall, it’s very hard to say what the result will be, and we likely won’t know until February, at the earliest. That’s when the FCC is due to vote, and even then the story wouldn’t end. The deal has several stages to go through, and then AT&T would likely appeal any decision it thinks is unfavorable to the company. The result is that we likely won’t know the impact for years to come.

Category: News

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