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AT&T/T-Mobile Face Antitrust Issues

1 September 2011 - News - Editor

In the current economic climate, mergers and acquisitions offer potential for growth, as well as a means to cut costs by the laying off of staff and sharing of resources. The danger in M&A activity is the domination of markets by monopolies, and this is where antitrust authorities step in to ensure that markets remain competitive and consumers have a choice in products and services. The proposed takeover of T-Mobile by AT&T has been big news recently and it is no secret that AT&T was counting on this acquisition to compete with Verizon. But yesterday, the Department of Justice stepped in to block the $39 billion takeover in its current form, noting that the deal would push up prices for consumers and reduce competition.

Antitrust analysts have noted that this tougher stance by the US Department of Justice may very well limit prospects for other merger and acquisition deals in the telecommunications sector. While the door has been left open for a revised deal to be presented, it is more likely that the deal will be cancelled. Law professor at the University of Baltimore, Robert Lande, has been quoted as saying that in the past the Justice Department may have negotiated a compromise, whereas with the AT&T/T-Mobile proposal, they have been non-negotiable about the fact that they believe the deal would be anticompetitive.

In its complaint the Justice Department stated that combining the two companies would result in "higher prices, poorer quality services, fewer choices and fewer innovative products" and that this would be to the detriment of consumers. This statement could apply to any merger between top telecommunications companies, effectively shutting that door should the Justice Department win its suit. If the AT&T/T-Mobile deal is rejected, AT&T may have to payout more than $6 billion, news which saw its shares drop by four percent yesterday.

While not mentioning how many call-center jobs will be cut if the companies merge, AT&T has made it known that it would create 5,000 jobs in the Seattle area by moving T-Mobile's overseas call center to the United States. But analysts are saying that in light of the country's current rate of unemployment, the offer of jobs in the short term may cloud judgment, and those in favor of the merger need to look at the entire picture.

Both AT&T and the holding company of T-Mobile, German company Deutsche Telekom (DTE), have made it known that they intend to fight the Justice Department's suit.

 


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