If you haven’t seen, the Department of Justice voiced its lack of support for AT&T’s buyout of T-Mobile USA. I find myself agreeing with Sascha Segan’s analysis at PC Magazine.
A leaked letter a couple of weeks ago indicated that AT&T can, for $3.8 billion, build the capability they publicly say they can only get by buying T-Mobile. But, in the long run, it’s more profitable for AT&T to overpay (to the tune of $39 billion) for T-Mobile to get rid of a competitor.
The reasons are pretty clear. T-Mobile consistently undercuts AT&T and Verizon prices, so eliminating T-Mobile would reduce pricing pressure on AT&T, and it’s difficult to see a clear path for Sprint’s continued survival after T-Mobile falls by the wayside, when it’s competing with two companies with 3 times as much market share. The most likely scenario, if T-Mobile disappears, is that Sprint would eventually have no choice but to sell out to Verizon, eliminating the other medium-sized competitor and creating, for all intents and purposes, a duopoly, each with around 45% of the market.
I agree with Sache Segan that we don’t really need four viable, national mobile carriers. We need five. Between them, U.S. Cellular, Cricket, and MetroPCS have 7% of the market, and could cover much of the United States. Having two large carriers with around 25% market share each and three smaller carriers with 15-20% each–which would require T-Mobile and this proposed conglomerate to both grow a bit–seems ideal. After all, it’s competition, not consolidation, that generally drives prices down. And the cellular phone market is still relatively young. Yes, cellular phones have existed since the 1970s, but as mass-market items, cellular phones and particularly smartphones are still pretty new.
The Department of Justice didn’t even address AT&T’s claim that the merger will create jobs. The reason is pretty simple: There’s no way it would. If AT&T spends the $3.8 billion to build more infrastructure, that might create jobs. But integrating T-Mobile will eliminate more jobs than the task of integrating the two companies will create. Thousands of T-Mobile retail locations will become redundant, as well as basically all of T-Mobile’s internal departments. So we’d have thousands of newly unemployed former T-Mobile employees, and hundreds of vacant former telephone stores for the economy to absorb. If there’s an AT&T store across the street from a T-Mobile store, one of those stores is going to close. And since some phone stores are franchisees rather than being company owned, some small businesses will suffer.
And I speak from some experience. I’ve been a T-Mobile customer for several years. I’ve always found them pleasant to deal with. I’ve been an AT&T customer for several years. The last time I had to deal with AT&T, about a downed phone line in my yard, they were pleasant. But usually, I find AT&T condescending and patronizing. I’d rather buy fewer services from AT&T, rather than more.