Why Does the US Sue to Block the AT&T’s takeover of T-Mobile?
AT&T is the second largest cellular plan provider (Verizon is number 1). T-Mobile is the fourth largest provider of cellular plan in the US, and is owned by Deutsche Telekom AG. The third largest US cellular plan provider is Sprint…
Based on the snippet below from the online site of The Wallstreet Journal, it sounds like T-Mobile needs some help and wasn’t a victim.
Deutsche Telekom, unwilling to keep investing in the U.S. wireless industry, had been seeking ways to offload T-Mobile USA for at least two years before it settled on the sale to AT&T.
So the takeover of T-Mobile by AT&T would have made AT&T the largest cellphone plan provider, and give AT&T a needed shot of newer technology to help them improve their service. So I see the synergies of such a takeover, but I also understand how it could reduce competition and drive prices up. In my opinion, the prices of cellphone plans are already too crazy high to begin with! It’s amazing to me that 10 years ago cell phone plans were cheaper or at least as expensive as they are today. Usually, when a service or product is first introduced, it get cheaper as the masses jump on board, but this hasn’t been the case with cellphone plan providers.
So based on the previous paragraph, you think I’d be positive on the block by US Department of Justice, but I’m not. My problem is why wasn’t this entire AT&T proposal nixed at the beginning when AT&T submitted their plans for the merger of the two companies? It seems wasteful of the Department of Justice to change their mind and later go after AT&T in court. It makes one wonder if the US is doing this move so to help someone’s career? After all, they could have denied the merger at the very beginning before money and plans for the merger proceeded forward!
Lately, I’ve noticed the US government seems to be suing more than they have ever before. I have to wonder if other countries sue themselves as much as we do? I think it makes us look silly when a company gets approval for a merger by the government and then later gets sued by the government. It’s like telling a kid she can have a snack, then yelling at the kid what she unwraps it so she can eat it.
Doesn’t really instill a lot of confidence in the government huh? And people wonder why US companies are sitting on the sideline because they are afraid what will come out of the government next. Such actions don’t help businesses recover, and while I’m not in favor of AT&T takeover, I think it sends a bad message when a company gets attacked after getting approval from government to go ahead with their plans. Why even have businesses submit merger or takeover plans for review by the government, if shortly there after, the government can just go and sue the company anyway? Kind of defeats the purpose and expense of having a US review department of the government?
I know everybody is focused on AT&T, but I have to wonder if I’m the only one that thinks that the government suing AT&T makes the US government look a bit less smart than it should be? Doesn’t flip-flop actions by the government in this case make us all lose confidence in the economic recovery, since business will be frozen until the next elections? What if the same government stays in power, does that mean that businesses will continue to stay frozen and the possibility of a true economic recovery remains slim?
Confused by the actions of the government,
MR
I’ll have to respectfully disagree MR. For the amount of money AT&T is paying for the merger, it can actually build the infrastructure and create jobs in the process. (Sprint’s argument, not mine, but I agree).
This is not about AT&T trying to provide better coverage, this is about killing competition. Less competition is never good.
Yeah, I saw that 16 Billion or something like that. I’m not in favor of the merger either, I just don’t like the way the government handled it. They should have said upfront “Don’t Do It”…
The thing is that before this merger got as far as it got, the government could have said “No”. This could have saved AT&T money and grief.
I now understand why businesses are afraid to do anything in this type of environment.
Hi MR!
I’m not familiar with corporate mergers so I was wondering if you can help me understand this post a little better. I read the WSJ article and they didn’t mention anything about the merger being approved before hand. Are corporate mergers typically approved by the government before hand? If so, is it the DOJ that approves it? Maybe it’s another department that approved the merger and the DOJ just happen to catch the mistake (a benefit of check and balance government)?
Thanks for the clarification!
Businesses check with antitrust regulators to see if such merges will fly, and based off of the antitrust regulators response they usually do or don’t do a merger.
I’ve been following AT&T’s proposal for a while and I know that the antitrust regulators nor the DOJ (Department of Justice) didn’t reject their proposal. In fact AT&T even stated that they were surprised (see following):
AT&T said:
“We have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated”
So it’s not like it was a surprise to the DOJ…And now all of a sudden it’s a problem for the DOJ…
Another example is our credit crisis, now the government is suing the banks. They are acting like the banks are stable and the economy is roaring?!? I mean come on, talk about shooting yourself in the foot. Do they really think that banks will lend money with a new big lawsuit against them? No wonder we’re losing our status as a superpower… geez…
Jin6655321 asked some very import questions. Your article makes a lot of accusations, but doesn’t provide any type of proof to support them.
Jin6655321 is a smart cookie, no doubt about that.
The only reasons I know this is because I’ve been following the AT&T takeover for a while now. This isn’t something new. Back in the beginning, Jim Cramer even talked about it, months ago.
I guess I just assumed everybody was up on this matter, but in reality, I’m looking for a new cellphone provider and I was upset about the merger and the government lack of acting. Now after the fact, they decide to act which will cost AT&T billions, thus potentially raising rates even higher… Talk about a lose-lose scenario! And the economy sucks to boot, unemployment is at 9.1%!!!
Grrrr, I’m so frustrated.
The cell phone industry is trying to consolidate similar to the airline industry. We see what is going on in the airline industry, prices are going up.
Yes, I think the prices should be going down now… I know infrastructure cost are high, but with the number of people using cellphone services, you’d think they would be coming down in price.
Just for the record I’m against the merger, but I think the antitrust regulators should have stated this upfront. Why sue costing the company and taxpayers millions of dollars, and costing AT&T billions of dollars in the process. I’m sure AT&T is just going to pass that cost along to the consumer.
My beef is that the antitrust regulators didn’t do their due diligence.
I am definitely against big business mergers. Even though it MAY create more jobs will it? Or will it merely justify the company to be able to raise prices and make more revenue because they are practically a monopoly.
In this particular case, yes it will move more jobs here. I believe T-Mobile is a German company? Instead of those workers being situated in Germany, I believe some of the position were to move to the US.
That said, I’m against the merger too and say so in the article above 😉