Sprint Nextel Corp. filed to block AT&T Inc.’s $39 billion merger with T-Mobile USA Inc., arguing the deal would harm retail consumers and lessen competition within the mobile wireless industry. This lawsuit came shortly after the Department of Justice’s antitrust lawsuit on Aug. 31.
“[The merger] may have a large anti-competitor effect, and that’s what the Department of Justice is worried about, higher prices for consumers, less innovation,” said Gordon Phillips, University of Maryland professor of finance.
AT&T’s general counsel Wayne Watts said that AT&T intends to fight against the lawsuit. “We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.”
Currently, the four U.S. mobile wireless telecommunications providers are at the top of the industry in terms of revenue are Verizon, AT&T, T-Mobile and Sprint. They have already siphoned off large parts of the markets for themselves; with a T-Mobile takeover, some argue that the market would not change.
“They would argue that if you don’t let [AT&T and T-Mobile] merge, you would have a true monopoly in that area because Verizon is so much bigger than T-Mobile,” said Gerard Hoberg, associate professor of finance. “But at least if they merge, you would have a duopoly. [So] this action is actually increasing competitiveness.”
AT&T will be required to pay Deutsche Telekom, owner of T-Mobile, an estimated $6 billion with $3 billion in cash and the remainder to be paid in a transfer of wireless spectrum, if the deal is not approved.
“They have a very large break up fee, which is very unusual,” said Phillips. “So now, AT&T is really in trouble if they don’t get this deal. T-Mobile themselves probably thought [the deal] might not be approved.”
University of Maryland business major, Philip Young, said the Department of Justice makes a good argument.
“I do think [the Department of Justice] has a say in this because competition is good for the business world,” said Young. “But in the case that this [merger] does happen, I guess people can expect to pay higher prices and be more upset with their companies.”