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Weak Merits of AT & T, T-Mobile Deal Drove DOJ Suit

Wed, 08/31/2011 - 1:36pm
Maisie Ramsay

For all its lobbying, reasoning and explanations, AT&T ultimately failed to convince federal antitrust regulators to give the green light to its merger with T-Mobile USA, and the Department of Justice filed to block the deal on Wednesday.

In a blunt dismissal of the deal’s merits, the DOJ said there were better ways for AT&T to address its capacity problems than taking out one of its primary competitors and suggested the operator spend more money on network upgrades.

“AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor,” it said in a statement.

AT&T has repeatedly said that the deal will be good for consumers, stating it would allow it to quickly increase the capacity of its network and expand its LTE footprint into underserved rural areas.

The company also claimed the merger would leave competition unharmed and prices unaffected. While simultaneously touting the “synergies” and efficiencies of the deal, AT&T has said the merger would ultimately lead to the creation of 96,000 jobs. And to further sweeten the deal, AT&T vowed to repatriate 5,000 outsourced call center jobs to the United States if the merger was approved.

In addition, both AT&T and Deutsche Telekom have argued that T-Mobile will not be a viable competitor if left to its own devices.

But as the DOJ’s decision shows, AT&T failed to prove the purported benefits of the transaction outweighed the potential damage to competition.

The DOJ said the merger would harm competition on both a local and national level since the two operators compete in nearly all of the nation's top 100 wireless markets. The merger would also remove a significant price competitor from the industry – and one that was also a disruptive force on new operating systems, pricing plans and network upgrades.

In the end, AT&T’s efforts to buoy the deal with promises of new jobs and more mobile broadband access were not enough to offset the significant market concentration that would have resulted from the merger.

The DOJ’s criticism of the deal echoes similar views from consumer groups and wireless operators opposed to the transaction.

Sprint has called the supposed benefits of the deal “illusory,” alleging that AT&T had failed to make investments that would make the most efficient use of its spectrum. Consumer advocacy group Public Knowledge has lobbed similar complaints about AT&T’s claims, saying the operator had failed to “manage its assets effectively.”

AT&T has denied this, saying its merger with T-Mobile is the most efficient way to address a massive increase in data traffic.

The FCC hasn’t come down with its final ruling on the deal yet, but it is unlikely that the agency’s decision will differ from the DOJ’s.

If AT&T was attempting to resurrect MaBell, as some of its competitors claim, regulators aren’t going to give it the go-ahead this time around.

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