The Justice Department is suing to stop AT&T’s proposed acquisition of T-Mobile, which would have consolidated three-quarters of cellphone-plan market into the hands of two companies. I have to say I didn’t think they had it in them.
The skeptical press coverage given the deal’s announcement certainly didn’t hurt, nor did later coverage like stories from the Washington Post and Politico exposing how nonprofits like the NAACP and GLAAD sold out to back the deal. Thanks to Politico, for instance, we know AT&T’s charitable foundation is headed by its chief lobbyist, which is pretty darn cynical.
Which raises a question: How do you get to the point where a $160 billion company thinks its a good idea to have its chief lobbyist run its charitable giving?
Does it have anything to do with the hubris required to push a deal so clearly anticompetitive that it prompted a Wall Street analyst to say this:
“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,” Jonathan Chaplin, an analyst at Credit Suisse Group AG in New York, said in a note. “We have never seen a deal with more regulatory risk be attempted in the U.S.”
If the deal fails, as seems likely now, AT&T will have to pay T-Mobile $3 billion in cash and up to another $3 billion in wireless spectrum and “favorable” deals. Six billion dollars is about 15 percent of Deutsche Telekom’s entire market cap—a crazy amount of money.
If the deal fails, as seems likely now, it will surely cause widespread ass-covering, blame-shifting, and perhaps even turmoil in the C-suite at AT&T, which is great for reporters. I’d certainly like to read a deep dive on what AT&T was thinking.
One aspect to consider is that even if the deal fails, the deal may not be a failure. The consolation prize may be worth the time and money, perhaps more than AT&T is offering. Roaming agreements that include VoIP over one another's Wi-Fi hotspots could vacate capacity on their traditional networks and/or provide a new value-add for their service plans. Sounds pretty favorable to me...
#1 Posted by Jonathan, CJR on Thu 1 Sep 2011 at 10:39 AM
Well, finally, the Justice Department chooses to act as a Justice Department, to prevent a merger that would only benefit a few at the expense of the many.
The staggering number of the unemployed in the US is a direct result of corporate consolidation. Why we have allowed this to go on is beyond me. And until the president moves forcibly to stop it, once and for all, our economy will continue its downward spiral.
Wall Street is victorious. Main Street is vanquished.
George Mitrovich
San Diego
#2 Posted by George Mitrovich, CJR on Thu 1 Sep 2011 at 03:17 PM
The Justice Dept. is entitled to look into whether the acquisition is in restraint of trade, and oppose it. That's what anti-trust laws are for. However, and props to it, the NY Times today noted that T-Mobile is in serious difficulty if the the merger is blocked, since it has been losing market share. I hope non-ideological coverage is willing to put the responsibility on the Administration if the merger is blocked and T-Mobile has to sell out to someone, at reduced price, in a bankruptcy proceeding.
All government interventions in the marketplace have trade-offs and down-sides, and it is good that good journalists acknowledge this instead of falling into the usual, politically-tainted good guys vs. bad guys framing.
#3 Posted by Mark Richard, CJR on Fri 2 Sep 2011 at 12:37 PM