UPDATED 08:29 EDT / MARCH 21 2011

AT&T’s Major Takeover Hits Consumers with Typical Ma Bell Tactics

After rumors of a possible merger between US top mobile carriers T-Mobile and Sprint have been spread out, today’s news overturns everything. According to Forbes and other major publications, AT&T has publicly expressed its intentions of acquiring T-Mobile USA, leaving the first to pay a $3 billion break-up fee to the latter.Yet, some voices are reluctant to give credit to this $39 billion merger considering the regulatory tests the deal has to pass, that of the U.S. Department of Justice and the Federal Communications Commission (FCC).

The deal would imply the creation of an enormous carrier serving about 130 million wireless subscribers, in comparison to Verizon’s approximately 100 million subscribers and Sprint’s almost 50 million subscribers. This might as well bring about a price breaks, price increase in products and services in the whole industry and less ‘innovation’ from the carriers. Jonathan Chaplin, analyst at Credit Suisse notes:

“We have never seen a deal with more regulatory risk be attempted in the US. It is unlikely that AT&T would attempt a deal that they knew would fail; however, we can’t see how they would get this through without massive divestitures and concessions.  It looks like AT&T is on the hook for a $3BN break-up fee if the deal fails – not huge (maybe a worthwhile price to pay just to break up the Sprint/ T-Mobile deal).”

Public interest law firm Media Access Project agreed, contending that a combined AT&T and T-Mobile would “further increase costs and decrease choices for the public” by giving “three players…nearly three-quarters of [the wireless] market.”

But AT&T’s announcement puts a new face on the whole industry as well and its services. Such a merger promises big benefits to carriers’ customers, approaching the plan envisaged by president Obama, that of connecting the whole of the US on high speed internet, formulated one year ago. The AT&T and –Mobile deal is accompanied by a plan to spend more than $8 billion on infrastructure as the companies’ networks are combined and to expand 4G/LTE connectivity to rural communities that would otherwise miss out on fast mobile broadband. Charles Golvin from Forrester Research notes:

“The good news: high-speed mobile broadband service will improve in quality and coverage, including — in the long run — those in rural communities outside the reach of terrestrial broadband today. The bad news: the cost of that service won’t come down nearly as fast as customers would like, since AT&T and Verizon Wireless combined would own nearly three out of every four wireless subscriptions in the US.”


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