Phone Bulletin

As you may have heard, AT&T’s proposed $39 billion acquisition of T-Mobile USA has hit a roadblock – a roadblock that may not be penetrable. After weeks of speculation regarding the antitrust issues posed by the deal, the Department of Justice announced its opposition and its intention to battle the merger in court. Legal experts predict that the DOJ will emerge victorious, effectively killing the deal. After all, they say, the DOJ only needs to prove that the merger would significantly reduce competition and, consequently, be detrimental to the public interest. The size, consumer base, and marketplace power commanded by a marriage of AT&T and T-Mobile would likely make this easy to prove.

Even with this writing on the wall, AT&T has announced its intention of fighting the case in court. This means that there are a range of possible outcomes: AT&T could win outright, it could win by selling off T-Mobile assets and appeasing regulators, it could lose and revert to the status quo, or it could lose and enter into a joint venture with T-Mobile. These are the main possibilities, although there certainly are more out there.

So what does this mean for the consumer? How will the market change if each one of these outcomes came to pass? On that note, here is a quick breakdown:

AT&T Wins The Case Outright

This is an unlikely outcome, as aforementioned, but if it came to pass it would probably have the impact that regulators fear. With the inclusion of T-Mobile, AT&T would quickly become the dominant player in the mobile industry. It would control most 4G phone plans, not to mention smartphones overall, and it would be well ahead in terms of market share from its main competitor, Verizon. Whether this would result in increased rates is impossible to say with certainty, but competition and consumer choice would surely decrease.

AT&T Wins After Selling Off Assets

AT&T has reportedly explored selling off T-Mobile assets – up to 40% — in order to gain DOJ approval. These assets would be sold to small mobile providers, thus insuring greater competition in the marketplace. For the consumer, however, AT&T would still catapult to dominance in the industry. There may be more options for people who are flexible with their phone choice, but those who want the hottest new smartphones will increasingly find themselves turning to AT&T.

AT&T Loses, Reverts to Status Quo

It would be incorrect to assume that the status quo means that nothing will change for the consumer. If AT&T loses the case, it owes $4 billion in break-up fees to T-Mobile. Analysts predict that T-Mobile would use this cash to shore up its network, improve its marketability, and gear up for another sale. This time, the sale would probably take the form of a merger with Sprint. For the consumer, this would mean three major players in the industry: AT&T, Verizon Wireless, and Sprint/T-Mobile. The three way battle for dominance would heighten competition and possibly drive down prices.

AT&T Loses, Enters Into a Joint Venture

If AT&T cannot succeed in buying T-Mobile, it still may choose to enter into a joint venture between the two companies. While this certainly has its pros and cons for the mobile providers involved, the impact on the consumer is likely to remain small. For all intents and purposes, AT&T and T-Mobile would continue to have a good deal of independence. There is a chance, though, that some stores may be closed.

The actual outcome of the case remains to be seen, not to mention the effect it has on the mobile phone consumer. It’s quite clear, though, that the proposed merger stands to considerably shake-up the industry, for better or for worse. For that reason, we’ll be closely watching.