Is the AT&T and T-Mobile Merger at Risk?

Merge of AT&T and T-Mobile
Merge of AT&T and T-Mobile


(T) is threatening to become the T-Rex of the wireless world. That's not a toothless claim: Sprint Nextel (S), the third largest wireless carrier, says it doubts it could survive if AT&T pushes its T-Mobile acquisition through the Federal Communications Commission and Department of Justice antitrust vetting process. That deal would drop the present No. 1 carrier Verizon (VZ) into second place behind the new king of the wireless world, AT&T. But the idea of AT&T and Verizon owning 80% of U.S. cellphone contracts has created concern outside of Sprint Nextel.

Attorneys general in nine states have started investigations into the proposed merger, with New York's AG saying he wants to make sure it would not have an anticompetitive effect. Individual consumers are also apprehensive and have bombarded the FCC with their uneasiness about reduced wireless choices.

Losing Trust in the Antitrust Process

The merger may also face a backlash from events surrounding Comcast's (CMCSA) recent purchase of NBC Universal. FCC Commissioner Meredith Baker voted to approve that merger last January. In May, she resigned to take a management position with Comcast-NBC Universal. That action has done nothing to increase faith in the evenhandedness of the antitrust process.

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Then there's the outgoing Justice Department antitrust head Christine Varney -- a President Barack Obama appointee -- who has signed off on all major mergers that have come before her. Those have included the Comcast-NBC Universal deal as well as United Airlines' (UAL) acquisition of Continental. Even though the president does not review corporate mergers, public interest groups have denounced the Obama administration as going too easy on those corporate meldings.

Will the Merger Create Jobs or Destroy Them?

Supporters of the purchase include the Communications Workers of America, the largest of the communications industry unions. It says the merger would create 100,000 new jobs, quite an accomplishment in this job-starved economy.

But critics such as the American Antitrust Institute dispute that outcome. They say mergers always mean a loss of redundant positions and this one would be no different.

The only thing certain with this deal seems to be the uncertainty of T-Mobile's future. As such, many independent T-Mobile dealers are not waiting for the ax to fall and have been closing up shop. More than half of AT&T's retail locations are within a mile of a T-Mobile store, which is a redundancy that should prove unnecessary after the merger.

The shuttering of possibly hundreds of T-Mobile operations would also add to the number of empty storefronts across America. The shopping center vacancy rate is now more than 10%, the highest in 20 years. Clearly, there's more at stake here than a marriage of two companies.

Motley Fool contributor Dan Radovsky owns shares in AT&T. Motley Fool newsletter services have recommended buying shares of AT&T.