by Bill Snyder

AT&T Surrenders; Drops Megamerger with T-Mobile

Dec 20, 20113 mins
CarriersMobileSmall and Medium Business

Christmas comes early for consumers as AT&T surrenders to pressure from the Department of Justice and drops its $39 billion attempt to acquire T-Mobile.

Now and then the good guys win. And this is one of those times. If AT&T had been allowed to purchase T-Mobile, consumers would have had even less choice than they do now, and AT&T would have had even less incentive to improve its crummy wireless network.

But AT&T surrendered Monday, acknowledging that its chances to beat back the challenge waged by the Department of Justice — a challenged strengthened by pro consumer groups — were DOA, as in dead on arrival. If it had been approved, the $39 billion deal would have created the largest wireless company in the country, leaving Sprint and Verizon to as the only major alternatives to AT&T. Indeed, state regulators that I speak with regularly were convinced that Verizon would have then gobbled up Sprint, leaving consumers facing a classic duopoly.

Consumers won today,” Sharis A. Pozen, the Justice Department’s acting assistant attorney general for antitrust, said in a statement. “Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation.”

Although AT&T claimed that the merger would allow it to use T-Mobile’s wireless spectrum to improve its service, consumer groups and federal regulators disagreed, saying Ma Bell could acquire spectrum elsewhere and bolster its network for much less money.

“As the public, the Justice Department and the FCC long ago recognized — and now even AT&T must admit — this deal would have only meant higher prices, fewer choices and tens of thousands of lost American jobs,” said Craig Aaron, CEO of Free Press, a non-partisan consumer pressure group.

“Good riddance. The Obama administration deserves praise and credit for standing up to AT&T’s relentless lobbying and propaganda. And the American public can breathe a sigh of relief that this time the public interest trumped AT&T’s self-serving attempt to kill off what little competition remains in the wireless market,” he added in a prepared statement.

AT&T also claimed that the merger would create many jobs. But while the company was making that argument, its legal filings with the government said just the opposite: the merger would result in significant layoffs in the combined company, AT&T admitted.

So here’s the balance sheet: The merger would have reduced competition in the wireless market, since one of only four major players would disappear. That would result in less competitive pressure to keep prices down and less incentive to develop new and exciting products and technologies. And it would destroy a significant number of jobs, the last thing our weak economy needs right now.

On the other side of the balance sheet, you have AT&T contention that the merger would allow it to improve its network. That’s about it, though I do agree that T-Mobile, which spent more than a year fighting to sell itself to AT&T, instead of striking a less obnoxious deal or finding another way to strengthen itself, is now in trouble.

It’s not a close call. Be glad the government did the right thing; and if you’re one of the thousands of consumers who protested via email or petitions or phone calls, give yourself a pat on the back. Sometimes the good guys win.