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Analysis of the attempted merger of AT&T and T- Mobile - Research Paper Example

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Analysis of the attempted merger of AT&T and T- Mobile Abstract The project will talk about the attempted merger between AT&T and T-mobile. It will try to find out whether the merger attempted would have been good or bad through economic analysis. The project will analyze the likely effects of the merger both the point of view of customer and from the point of view of T-mobile…
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Analysis of the attempted merger of AT&T and T- Mobile
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Analysis of the attempted merger of AT&T and T- Mobile

Download file to see previous pages... Both the organizations contended that the proposed merger lacks the capability to affect the wireless service competition. They stated that other wireless service providers can easily replace the competition lost because of merger and the merger would dwarf the effects of anti-competition. AT&T hoped to buy T-mobile from Deutsche Telecom with the deal amounting to 39 billion dollars. With the effect of the deal AT&T became the largest mobile phone service provider in United States as the deal came with more than 33 million subscribers. If the deal would have been accepted AT&T would have enjoyed a market share of 43% widening the gap with the competitors further (Communications Workers of America, 2011). Research questions Whether the attempted merger between AT&T and T-mobile good or not. Literature Review and Analysis Some researchers posed the thought that the merger would contribute to enhance the market power. The wireless market as well as the post paid market is highly concentrated at the national level using the brink of guidelines of Horizontal Merger. The concentration falls in the range where DOJ and FTC conclude. The guidelines provide that concentration and market shares are measured on revenue basis. The revenues are attributable to the facilities based carriers in the wireless market. Using Herfindahl-Hirschman index they showed that the approach will contribute to enhance market power. It was found that T-mobile continued to be the significant competitor within the market structure (The New York Times. 2011). The other competitors did not have the capability to deal with the slack that resulted from the elimination of T-mobile from the framework of competition. The efficiency claims of AT&T were overstated and the efficiencies resulted from the merger was not good enough to overcome the effects of anti-competition. It was also found that the merger was likely to increase the competitive disadvantages for the other players in the market (Besen, Kletter, Moresi, Salop and Woodbury, 2012). The costs got higher while the quality standard got reduced. The effect was also felt on roaming services by limiting the access of the players on leading edge handsets. The competitive significance of the players would have suffered and would have led to recreation of wireless duopoly. The prices of wireless services fell and reversion to effective duopoly would reverse the gains from wireless competition. The merging companies were not offering differentiated products at different local prices on the basis of local conditions of competition. Therefore it was necessary to evaluate the competitive effects of national market as well as the separate conditions in different local markets (The Centre of Media Justice, 2012). If concerns are found at the national level then it would not be possible for the concerns to take care of the localized markets. At one time the Guidelines of merger stated that only small antitrust markets would be analyzed but the approach is ignored by antitrust agencies policies. If the deal would have really taken place the consumers would have been harmed by two waves. The current customers of T-mobile will now have to opt for AT&T’s expensive phones and data plans rather than the value priced smart phones and cheap data plans. The main aim of AT&T in the merger was to create a ...Download file to see next pagesRead More
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