Examining AT&T’s Proposed Acquisition of T-Mobile
By: Svetlana Matt on April 5, 2011
On March 20, AT&T announced an agreement to acquire T-Mobile USA from Deutsche Telekom AG. AT&T is the second largest cellular service provider in the U.S. and T-Mobile is the fourth largest. Following the horizontal merger, AT&T will account for 42% of the cellular phone service market; between it and Verizon, 70% of the domestic market will be covered. The rest of the market includes Sprint (12%), and regional carriers such as Metro PCS and Leap Wireless. The merger will provide T-Mobile customers with access to the fourth generation (4G) wireless broadband network. The merger is also expected to improve the quality of connections for current AT&T customers.
Under the Hart-Scott-Rodino Antitrust Improvements Act and the Communications Act, the $39 billion transaction requires approval by both the U.S. Department of Justice and the Federal Communications Commission, respectively. In a report issued last May, the FCC concluded that “[t]here appears to be increasing concentration in the mobile wireless market.” Both agencies will scrutinize the proposed merger closely in light of this finding and the industry’s high entry barriers. AT&T claims that the industry will remain competitive following the merger, as evidenced by the fact that 18 of the 20 major markets, including San Francisco, Chicago, and New York, each currently have at least five competitors (this includes regional carriers).