The U.S. government is taking steps to block AT&T’s deal to buy T-Mobile for $39 billion. The US says the deal would “substantially lessen competition” in the wireless market. We could not agree more. It’s already kind of a low competition now. You have AT&T, Verizon, T-Mobile and Sprint. AT&T shares fell like a rock on the news. They fell as much as 5% The U.S. says that a AT&T’s takeover of T-Mobile would violate U.S. antitrust law. The U.S. wants the court order blocking any arrangement implementing the deal. The FCC has given itself more time to study new data presented by AT&T but most U.S. lawmakers have said the deal will reduce competition and raise consumer costs.
“AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market,” the U.S. said in its filing.
If regulators reject the deal, which they should; AT&T would have to pay Deutsche Telekom $3 billion in cash. AT&T would also have to provide T-Mobile USA with wireless spectrum in some regions and reduced charges for calls into AT&T’s network. So in total AT&T stands to lose as much as $7 billion if the deal does not go through. Just looking at the amount of the cancellation fee that was negotiated into his agreement; makes it clear that AT&T has the incentive to fight. Deutsche Telekom (T-Mobile), AT&T and the Justice Department spokeswoman declined to immediately comment.
AT&T fell 3.4% New York Stock Exchange. Deutsche Telekom dropped 6.4% The purchase of T-Mobile would combine the 2nd and 4th largest carriers to create a new market leader. That would mean current #1 Verizon Wireless would take a drop. Current # 3 carrier Sprint Nextel Corp which argued against the deal would be a non factor if the deal goes through. The news helped Sprint’s shares jumped about 9.9%
AT&T sent the FCC new economic models that showed the merger would lower prices and increase service in some markets. The report of course is not fact that can be relied on as it makes no sense. Less companies can not equal more competition. Andrew Gavil, a law professor at Howard University in Washington “The fact that the Justice Department is challenging the deal doesn’t mean they won’t negotiate a resolution at some point”