AT&T just agreed to acquire T-Mobile USA for $39 billion, and I don’t understand why regulators are allowing this re-organization of Ma Bell. I was under the impression that the 1982 settlement with the U.S. Department of Justice was supposed to ensure that this anti-competitive behemoth would not be coming back. But given today’s news, and the fact that AT&T has completed over $100 billion in acquisitions over the past decade, it seems to not only is Ma Bell coming back but she’s stronger than ever.
There will now be just 3 major telephone carriers in the entire United States down from a measly 4. To put that into context, Italy with a population of 60 million has 9 major telephone carriers. The United States with a population of 300 million has 3 major carriers, which works out to be 100 million people per carrier! These guys (and by these guys I really mean AT&T and Verizon) have little to no reason to compete, become more efficient, lower prices, or do anything that a healthy competitive environment encourages, simply because they’ve bought everybody.
Based on today’s market moves, shareholders from both companies seem to be quite giddy. Deutsche Telekom shareholders are especially delighted given that in 2001 they paid $50.7 billion for VoiceStream (which later became T-Mobile). But like a lot of the crappy deals made at the turn of the century, things did not quite work out as planned. The unit was recently valued at between $15 and $20 billion, so the $39 billion acquisition price gives them 19 - 24 billion new reasons to be in a good cheer... AT&T shareholders on the other hand are probably excited for a very different reason. They just became the top dogs in a field of 3, with plenty of cats to chase! Consumers, prepare for the screwing to begin.
There will now be just 3 major telephone carriers in the entire United States down from a measly 4. To put that into context, Italy with a population of 60 million has 9 major telephone carriers. The United States with a population of 300 million has 3 major carriers, which works out to be 100 million people per carrier! These guys (and by these guys I really mean AT&T and Verizon) have little to no reason to compete, become more efficient, lower prices, or do anything that a healthy competitive environment encourages, simply because they’ve bought everybody.
Based on today’s market moves, shareholders from both companies seem to be quite giddy. Deutsche Telekom shareholders are especially delighted given that in 2001 they paid $50.7 billion for VoiceStream (which later became T-Mobile). But like a lot of the crappy deals made at the turn of the century, things did not quite work out as planned. The unit was recently valued at between $15 and $20 billion, so the $39 billion acquisition price gives them 19 - 24 billion new reasons to be in a good cheer... AT&T shareholders on the other hand are probably excited for a very different reason. They just became the top dogs in a field of 3, with plenty of cats to chase! Consumers, prepare for the screwing to begin.
I agree. The more competition the cheaper it is for consumers and more innovative. The consolidate everything banking, phones, media. It is to save money but really if we kept these companies apart and required them to use US labor it would create a lot of jobs. Sure it is more efficient to have one call center in asia somewhere, however the people pay the bill and would not mind creating US jobs. Break all those monopolies.
ReplyDelete'Anonymous', well said. The consolidation of these businesses into one mammoth company does not necessarily lead to more efficient industry. In fact I would argue that in some cases its lead to the decline of industry.
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