Government // Mobile & Wireless
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11/29/2011
05:08 PM
Rob Preston
Rob Preston
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AT&T-T-Mobile Wrangling: What A Waste

Imagine if all the time and money spent on the wheeling and dealing around this merger were channeled into actually creating something of value.

The 11-month-long spectacle that is AT&T's attempt to acquire T-Mobile is a microcosm of this country's economic atrophy: billions of dollars set aside and countless man hours consumed to pander to regulators and special interests rather than create anything of value.

There are really no good or bad actors here, just a bunch of financiers and bureaucrats and lobbyists and litigants working a dysfunctional system. On one side we have the Justice Department, the FCC, and the likes of Verizon and Sprint. On the other is AT&T, flanked by Big Labor, which agreed to support the $39 billion T-Mobile deal in exchange for AT&T's pledge to bring thousands of wireless call center jobs back to the U.S.

Among the arguments against the merger: By reducing the number of major industry players to three, it would raise prices, degrade service, weaken competitors, eliminate jobs, and lock in customers. One nonprofit "public interest law firm" went so far as to say "this is arguably the most anti-competitive move in recent American economic history." Apparently the firm is unaware of the vibrant oligopolies that have emerged in the steel, aluminum, auto, tire, beer, and other mature U.S. industries. Even in highly regulated sectors like telecom, new competitors always spring forth.

The hyperbole from the AT&T camp has been no less rampant. It has argued that the merger would create thousands of jobs rather than eliminate them, expand mobile broadband to millions more people, and spur economic growth through billions of dollars in additional investments. It also has said the acquisition would help solve the shortage of available wireless spectrum, which it calls a "spectrum exhaust" situation. Hanging over AT&T has been the specter of owing T-Mobile parent Deutsche Telekom $6 billion in cash and other compensation should the deal fall through. AT&T would claim the merger will ease global warming (through less spectrum exhaust?) if it thought that claim would get it off the hook for $6 billion.

As of press time, AT&T's deal to buy T-Mobile was looking shaky. As my colleague Eric Zeman reports, AT&T announced early Thanksgiving morning that it had withdrawn its application from the FCC and said it would focus instead on winning the antitrust lawsuit the DOJ had filed against it on Aug. 31. AT&T also said it would take a $4 billion charge in the fourth quarter as it prepares for the breakup fee it will have to pay Deutsche Telekom should the deal unravel, a move seen as a precursor to AT&T submitting a revised merger proposal. Meantime, AT&T was reportedly trying to sell a sizable portion of T-Mobile's assets to a smaller wireless carrier to even out the competitive landscape and appease the regulatory gods.

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Imagine if all the time and money spent on that wheeling and dealing--on both sides of the merger aisle--were channeled into actually creating something: higher-speed networks, more-efficient operations support systems, more-responsive customer service teams, more-productive and -responsive regulatory regimes, more-transparent pricing, more-robust competition. Instead, it's a finger-pointing free-for-all.

The super committee players on Capitol Hill, an unproductive lot if there ever was one, must be in awe: So much wrangling, so little progress.

Rob Preston,
VP and Editor in Chief, InformationWeek
rpreston@techweb.com

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grammyputer
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grammyputer,
User Rank: Apprentice
1/25/2012 | 1:16:09 AM
re: AT&T-T-Mobile Wrangling: What A Waste
I am a little tired of adding the comment "big" to any reference to a labor union, and treating it as a bad thing. I have been working with computers since I started as a keypunch operator and a union member since 1978.

It is not immoral or unethical for individuals who are not managers to have a say in how the firm should be run. Nor is it unreasonable to be concerned about your workplace and try to keep your job.

I am tired of folks (or editors) that think that any non-manager or executive is an idiot. I have worked my way through to a degree in computer science and up the career ladder, but I like to work "hands-on" with computers, and not spend my days in meetings, so I have never applied for a management position.
stcloudG
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stcloudG,
User Rank: Apprentice
12/13/2011 | 7:07:55 PM
re: AT&T-T-Mobile Wrangling: What A Waste
More libertarian rantings from Rob Preston, maybe a job in political journalism would be better for him. Just get the government out of the way and let the free market do its job, just like in the libertarian paradise of Somalia.
CLAFOUNTAIN100
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CLAFOUNTAIN100,
User Rank: Strategist
12/2/2011 | 4:14:33 AM
re: AT&T-T-Mobile Wrangling: What A Waste
I was hoping the same. Because a little-discussed term of the sale is T-Mobile's great network--

Deutsche Telekom will recieve 8% ownership of AT&T stock, and also Deutsche Telekom, will get a seat on it's board of directors, in addition to the much talked about $38B.

So the actual value of T-Mobile US will be over US$50B based on today's stock price. It's fantastic that AT&T values T-Mobile US so much!

T-Mobile has a great network in the US, and it always works for my hotspot which I use with my iPod Touch and iPad. I think Android is over-rated.
Tom in the Mountains
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Tom in the Mountains,
User Rank: Apprentice
12/1/2011 | 9:20:17 PM
re: AT&T-T-Mobile Wrangling: What A Waste
To have a free market, you would have to break up both of these companies. The definition of a free market is one where no buyer or seller of a good can significantly affect the supply or demand for that good. This is nowhere close to a free market. Don't you mean "Let the oligopoly do it's thing, they won't hurt us..."

Did you know that in some countries, phones aren't locked to a particular service provider. Did you know that in all countries except the U.S. and Canada, incoming cell calls don't cost anything? Did you know that the U.S. has higher prices on voice, text and data than most other countries? Thank the oligopoly...
Tom in the Mountains
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Tom in the Mountains,
User Rank: Apprentice
12/1/2011 | 8:56:12 PM
re: AT&T-T-Mobile Wrangling: What A Waste
I wish AT&T would have put all this effort into trying to deliver faster and better internet and voice services rather than trying to grow by acquisition. As these companies grow bigger and their executives become further removed from customers, their services become more and more generic and less and less suitable to the needs of their individual customers.

I have TMobile pay-as-you-go cell service because I work at home in an area with NO cell service but move to areas with service when I shop, ski or travel. TMobile is the only one that lets me buy minutes without having them expire for a year. If the merger goes through, I give the product I buy a year.

I agree with the last paragraph in the article most of all.
RWILLIAMS000
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RWILLIAMS000,
User Rank: Apprentice
12/1/2011 | 8:18:43 PM
re: AT&T-T-Mobile Wrangling: What A Waste
This is one T-Mo customer who will immediately drop service within 5 minutes of ATT taking over. My experience with ATT soured me until I switched to T-Mobile
ANON1237925156805
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ANON1237925156805,
User Rank: Apprentice
12/1/2011 | 6:43:44 PM
re: AT&T-T-Mobile Wrangling: What A Waste
AT&T is no saint though they are no worse than Verizon either. They are just a favorite demon for some reason. But let's get real here. One way or the other T-Mobile is most likely going away. DT may well have been planning an assets firesale if AT&T had not come a'courting. Had their been such a sale, customers would have dispersed but those who really want GSM--which includes me--would likely have gone to AT&T. AT&T would likely have bid on some spectrum as well. How different is that from what will come to pass if the merger is allowed to happen with some reasonable constraints?

The main whiner is Sprint and they hardly qualify as disinterested. As a leader on price point they might be the main beneficiaries if T-Mobile dissolves so they've got skin in that game.

Whatever their motives in courting union support, AT&T does plan to onshore a significant number of non-menial jobs in a desperate economy if the deal goes through.

Scuttling the deal probably does not rescue T-Mobile--though the breakup payment would help it--and it would deeply harm AT&T at this point. How does that have a downward influence on prices, job stability, or long term of retaining many options for consumers?

Finally the notion of a duopoly with inevitable price rises is far from proven. It's a theory, just like supply side economics. (How's that one working out for us?) In fact there are vibrant regional carriers and some might see an opportunity to expand, maybe acquire some T-Mo customers and/or spectrum. Speaking from experience, AT&T might well grandfather in those with existing T-Mobile plans.

Once again the "right" answer is to find the sweet spot. Let the free market do it's think, but insist upon some boundaries and protections for the consumer. Problem is that finding that middle ground is almost always the most difficult route.
YMOM100
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YMOM100,
User Rank: Apprentice
12/1/2011 | 5:06:40 PM
re: AT&T-T-Mobile Wrangling: What A Waste
The merger is as bad as it can get. But about as worse is all the time and effort spent by Apple to sue any competitor who makes a tablet, even if it requires photoshopping evidence to have some sort of flimsy case.
In both examples only one group comes out ahead: lawyers.
SausageMaster
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SausageMaster,
User Rank: Apprentice
11/30/2011 | 10:53:35 PM
re: AT&T-T-Mobile Wrangling: What A Waste
As a T-Mo customer I was happy to hear that AT&T is being denied. T-Mo has done well for me, AT&T, not so much. I agree with the author of the article that AT&T would have done much better for itself if it had used the energy expended towards the T-Mo acquisition on making its network better, etc. In gambling that spectrum was the most important thing they have lost.
Jerrel
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Jerrel,
User Rank: Apprentice
11/30/2011 | 7:23:12 PM
re: AT&T-T-Mobile Wrangling: What A Waste
I was actually hoping this merger would see the light of day. If only for the sake of AT&T's current anguished customers, but also for tracfone, who relies quite heavily on AT&T (not to say AT&T don't rely heavily on tracfone too for polishing their quarterly new additions). It's for this reason that I still think AT&T have a chance of getting T-Mobile - through the Mexican giant America Movil, Tracfone's mother company, in which, AT&T have rather large and substantial interests.
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