AT&T: We'll Save America if You Don't Sue Us
Once again, the U.S. Justice Department is suiting up to battle AT&T (NYS: T) . Only this time, instead of seeking to break-up the monopoly we once knew as Ma Bell, the feds are seeking to block a $39 billion merger with T-Mobile.
AT&T said in a statement that it was shocked -- SHOCKED -- to learn of the DOJ's action, saying that regulators never hinted at an antitrust action in their negotiations with the company. Well, boo-freaking-hoo.
Didn't the rest of us see this coming? Not only would a combined AT&T-Mobile and Verizon control more than 80% of the mobile contract market here in the U.S., but we've all heard Sprint Nextel's (NYS: S) frantic pleas for intervention and read the protests of a certain comedian-turned-senator. I'd have been shocked if the DOJ didn't file suit.
Yet here's the problem: Just as Sirius and XM together possessed a stranglehold on the satellite radio market before combining to become Sirius XM (NAS: SIRI) , market dominance doesn't necessarily equate to an outstanding enterprise here, either. AT&T would be just another carrier if it didn't have the artificial sweetener we call the iPhone.
Interestingly, the new Ma Bell isn't making this argument. Instead, the statement points to the patriotic benefits of allowing the deal to go through, including improved wireless service, LTE broadband for 97% of the population, and "tens of thousands of jobs, at a time when our nation needs them most."
So the DOJ should back off because it's right for America? Why not just cue "The Star-Spangled Banner," too? I thought only the Hallmark Channel laid it on this thick.
Fortunately for AT&T and T-Mobile, you don't need to bleed red, white, and blue love for broadband in order to see that T-Mobile was and still is a business doomed by unlimited data plans, commodity pricing, and the end of exclusive handset contracts. On its own, T-Mobile has nowhere to go but down.
But hey, don't take my word for it. Look at the numbers for the two carriers to which it's most comparable: MetroPCS (NYS: PCS) and Sprint. All three have suffered at the hands of AT&T and Verizon (NYS: VZ) , mostly because of their relationships with Apple (NAS: AAPL) . Call it the iPhone divide.
You want to increase competition? Tell Tim Cook he has to sell to every telecom operator that wants the iPhone. Because blocking a merger between a bad business (i.e., T-Mobile) and an average business (i.e., AT&T) will do exactly nothing.
Do you agree? Disagree? Please weigh in using the comments box below. And if you'd like ongoing analysis of this digital drama, be sure to add these stocks to your watchlist:
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At the time this article was published
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