T-Mobile Rebel Alliance update #2

Let’s talk about T-Mobile again…

So the AT&T takeover is blocked, right?

No. The US Department of Justice has requested that the takeover be blocked, citing the Sherman Antitrust Act and related provisions of US law. While it is possible that the courts will block the takeover, it is by no means certain.

So AT&T will fight the decision in court?

Almost certainly. They agreed to pay $3 billion in cash to T-Mobile’s current owners, Deutsche Telekom, if the deal didn’t go through. They also agreed to other concessions in the event of the deal collapsing for any reason— such as giving part of their allocated wireless spectrum to T-Mobile. So all told, it could cost them around $7 billion if the takeover doesn’t happen.

So AT&T must have been pretty confident the deal would go through?

Yes. It’s clear from AT&T’s statements to the press that they were surprised; as their general counsel put it, “We have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated”.

AT&T spent $12 million lobbying politicians this year, a 30% increase over last year. Clearly they thought they had greased enough palms and wined and dined enough politicians that the takeover would be nodded through.

So what went wrong?

My guess is that the Department of Justice was flooded with so much correspondence opposing the deal that they felt they had to act. It’s possible that AT&T’s recent outrageous price hikes made the DoJ take more notice of consumer complaints.

In addition, a leaked AT&T document revealed that it would only cost them $3 billion to build out their 4G LTE network without buying T-Mobile, according to their own estimates. This rather undermined their claim that the reason for spending $39 billion on T-Mobile was to allow them to bring LTE to the rest of their network.

OK, so if their case is that weak, how can AT&T still win?

The most likely scenario for AT&T winning is that the DoJ goes to court and gets some minor concessions from AT&T, in return for dropping the case. For example, AT&T might agree to hand over some customers to a competitor, or to stop increasing prices for a year or two. Any DoJ officials who brokered such a deal would likely be offered well paid positions at AT&T after leaving office.

Isn’t that a bit cynical?

No, just realistic. For example, Republican FCC Commissioner Meredith Attwell Baker voted for the government to ignore antitrust concerns and approve the merger of Comcast and NBC. Four months later, she left the FCC for a job at Comcast.

In addition, “…the DOJ’s 25-page antitrust complaint filed in U.S. District Court for the District of Columbia reads more like a move toward a settlement than a document leading to a trial, said David Balto, an antitrust attorney and former policy director at the U.S. Federal Trade Commission” (as reported by IDG).

Certainly, AT&T donations have been a very good predictor of politicians’ responses to the news that the deal may be blocked.

So what should we, the consumers, do?

Keep writing to the appropriate officials, explaining calmly and clearly why you oppose any kind of deal allowing AT&T to take over T-Mobile. Maybe even send them campaign donations, if they will be running for election soon.

If the DoJ settles, there is an attempt to fight the merger via consumer lawsuit.

But if AT&T doesn’t buy T-Mobile, won’t T-Mobile be doomed?

No. T-Mobile is making a profit. It just isn’t making a big enough profit to satisfy Deutsche Telekom, who are more concerned with investing money in their European operations, where competition is much stronger.

I heard T-Mobile is rapidly losing customers?

It’s true that T-Mobile’s subscriber numbers have been dropping. However, the AT&T deal has likely made things worse. In mid 2010, T-Mobile was losing around 54,000 contract customers per quarter. Once the AT&T takeover was announced, that shot up to 380,000 per quarter. There has certainly been no sign of any improvement in customer retention since the deal was widely publicized.

Part of the ‘problem’ is that T-Mobile offers excellent deals without needing a contract; people who were happy with their old phones would simply not bother to sign another 2 year contract. Once the AT&T takeover plan went public, the number of customers willing to sign a 2 year contract that might wed them to AT&T apparently dwindled.

I myself would likely have signed a contract and upgraded to a better phone, if it hadn’t been for the announcement.

Why do T-Mobile’s customers hate the prospect of AT&T taking over their mobile phone provider?

There are many reasons, but let me summarize a few:

  • According to Consumer Reports ratings, AT&T is the worst cell phone provider in every single category. Worst value for money, worst voice call quality, worst data services, worst phones, worst web site, worst e-mail services, and worst customer service.
  • T-Mobile offers a good selection of Android phones. AT&T has a very limited selection, and tended to lock them so that you couldn’t run any software you wanted.
  • The takeover would leave AT&T as the only GSM provider in the USA. This is important because GSM is the worldwide standard for digital cellular phones. If you want a phone that will let you roam in Europe, it has to be GSM.
  • AT&T admitted that every single T-Mobile customer would need to buy a new phone — and sign a new 2-year contract.
  • T-Mobile is significantly cheaper than AT&T, especially if you want data service. I calculated that my bills would go up by around 30% if I had to use AT&T — and that was before they hiked the price of SMS messages last month.

You may want to mention these points in letters to government officials. Keep writing, because with $7 billion at stake, you can be sure that AT&T will be lobbying even harder in the upcoming months.