Late last week AT&T Inc. (T) filed a response to the Department of Justice lawsuit looking to block AT&T’s $39 billion acquisition of T-Mobile USA Inc.
In the response, AT&T again staked its claims that the deal would be good for consumers as it would provide AT&T with the assets needed to fortify its current network as well as bolster its plans to roll out higher speed mobile broadband services.
“Rather than substantially reducing competition, the combined firm will usher in more intense competition to an already vibrantly competitive market,” AT&T noted in the filing. “While acknowledging the importance of merger efficiencies in enhancing competition in its Merger Guidelines, the Department of Justice’s complaint fails to come to grips with the significant efficiencies this transaction will generate.”
The company also countered DoJ claims that the deal would be bad for competition by stating that T-Mobile USA is really not that competitive in the market, and that consumers will have more competitive choices with other carriers. Those more competitive players include nationwide players Verizon Wireless and Sprint Nextel Corp., which itself filed a lawsuit looking to block the deal; as well as regional players MetroPCS Communications Inc., Leap Wireless International Inc. U.S. Cellular Corp. and Cellular South.
“The Department does not and cannot explain how, in the face of all of these aggressive rivals, the combined AT&T/T-Mobile will have any ability or incentive to restrict output, raise prices, or slow innovation,” the filing states. “Nor can it explain how T-Mobile, the only major carrier to have actually lost subscribers in a robustly growing market, provides a unique competitive constraint on AT&T. It also fails to acknowledge that surging customer demand for wireless services drives carriers to invest, expand and innovate.”
The competition issue seems to be a glaring sticking point as the DoJ claim appears to take a more national picture of the current mobile space, while AT&T is looking at the market in a more local structure.
“Although the transaction will remove T-Mobile as an independent competitor, no significant consumer harm will result,” AT&T explains in the filing. “For the past two years, T-Mobile has been losing customers despite growing demand, and, without the spectrum to deploy a 4G LTE network such as that deployed by the other carriers, there is no reason to expect a change in its undifferentiated competitive significance. To the contrary, T-Mobile’s business model remains ‘stuck in the middle’ between larger providers like Verizon, AT&T, and Sprint, and lower-priced competitors like MetroPCS and Cricket. And T-Mobile’s German parent, Deutsche Telekom, announced that it would not continue to make significant investments in the United States. Blocking this transaction will not help T-Mobile or its customers, but the transfer of T-Mobile’s network capacity and infrastructure to AT&T, a healthy competitor, will enhance competition for all, now and in the future.”
The comment about DT’s plans to no longer invest in its U.S. subsidiary are a bit perplexing as just prior to AT&T’s announced acquisition of T-Mobile USA, the carrier hosted a wide-ranging investor conference where it laid out plans to re-establish itself as an aggressive player in the domestic mobile space. Those plans include comments from DT that it was looking at “various options to acquire additional spectrum and reduce the gap regarding economies of scale compared with its larger competitors, including partnering with other companies.”
Bored? Why not follow me on Twitter.