Last Updated Aug 31, 2011 1:38 PM EDT
The DOJ suit puts a screeching halt to what has been a heavy-handed campaign by AT&T to counter concerns that the acquisition would reduce competition in the wireless market. In its latest step, AT&T said that it would repatriate 5,000 call center jobs at "highly competitive wages and benefits."
That promise got the Communications Workers of America union salivating. Presumable that was not just for the "quality wages and benefits and good working conditions for U.S. workers" that it cited, but also for 5,000 additional union members and dues they would pay. Think how beaten-down the CWA must be by telecom-industry consolidation to welcome 5,000 new members that way; they'd represent just a tad over 0.7 percent of CWA's current 700,000-strong membership.
AT&T's real agenda: LTE is good, less competition is better
AT&T has also aggressively courted third parties -- civil-rights groups like the NAACP, gay-rights advocates, teachers unions and some astroturf outfits -- to declare their support for the merger. Yet AT&T's real agenda to eliminate competition recently became public, making an obvious sham of its "outreach" efforts.
It turns out that the company estimated that building out its LTE high-speed network, the supposed rationale for the deal, would have cost $3.8 billion. That's less than a tenth of the $39 billion the company would spend to buy T-Mobile -- an acquisition AT&T said was key to making an LTE roll-out possible.
The combination of AT&T and T-Mobile would have created by far the largest wireless carrier in the U.S. The new entity and Verizon (VZ) together would have held two-thirds of the domestic market in terms of customers and 78 percent of the revenues.
DOJ says no way
The DOJ didn't buy AT&T's argument that the merger would lower prices for consumers and create more and better jobs -- not all that surprising, given that any large-scale merger or acquisition like this one typically leads to mass layoffs in order to eliminate overlap:
"The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services," said Deputy Attorney General James M. Cole. "Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation's wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition."The DOJ also pointed out that T-Mobile had been innovative in introducing technology -- probably because it had to if it was going to be competitive at all -- and that it spurred AT&T to match it. If you've watched wireless pricing at all, it's not a big jump to assume that T-Mobile's pricing also put downward pressure on what other players did.
AT&T emailed a statement to our sister site CNET:
"We are surprised and disappointed by today's action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated," [AT&T General Counsel Wayne] Watts said. "At the end of the day, we believe facts will guide any final decision and the facts are clear. This merger will help solve our nation's spectrum exhaust situation and improve wireless service for millions; allow AT&T to expand 4G mobile broadband to another 55 million Americans, or 97 percent of the population; [and] result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most."BNET received an emailed opinion from antitrust expert and University of Notre Dame professor of law Joseph Bauer that supported the DOJ:
I'm pleasantly surprised, in light of DOJ's and FTC's reluctance to go after a number of other highly problematic mergers in the past 5-10 years. This merger would seriously reduce competition in the wireless market. By eliminating one of only four firms in the market, and by creating what would be the largest entity in the industry, the merger has the strong likelihood of diminishing consumer choice and leading to higher prices.Think about how corporate mergers always work, and Bauer's line of reasoning is more realistic than Wayne's. Companies that overlap in the markets and geographies they serve -- and AT&T and T-Mobile have considerable overlap -- cut jobs and reduce offerings because it makes no sense to pay two people to do the work of one. Any investment in additional jobs would likely be at best transferring people from eliminated jobs to work that might have to be done. Or maybe new technical jobs would replace old ones.
In any case, the deal isn't yet dead. But it's clearly not going anywhere for a while.
- AT&T's Real Agenda for T-Mobile Becomes Public
- AT&T Continues Its Not-So-Stealth Campaign To Acquire T-Mobile
- AT&T Works the Refs to Gin Up Support for Its T-Mobile Deal
- AT&T T-Mobile Deal: No, Not a Reaction to the Verizon iPhone