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AT&T and T-Mobile's failed merger - Research Paper Example

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AT&T and T-Mobile's failed merger Abstract The aim of the project is to discuss about the attempted merger between AT&T mobile. The assignment will take into account the attempted merger and the effects it could have shed on the consumers. The project will also take the view point of T-mobile…
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AT&T and T-Mobiles failed merger
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Download file to see previous pages Both the corporation, AT&T and T-mobile were of the opinion that the merger lacked the intensity to affect the interests of the consumers in the wireless market. In other words, the wireless market will remain indifferent in spite of the merger. The deal amounted to 39 billion dollars. As the result of the deal, AT&T emerged as the largest mobile phone service provider in the country. Research question Whether the deal would have been fruitful from the consumers’ point of view? Literature Review and Analysis The resulted deal would offer AT&T to enjoy 43% of the market share. The market power would have widened the difference among the competitors in the market further. Researchers were of the opinion that the resulting merger would contribute to enhance the market power. The market structure is highly concentrated with lots of competitors and follows the guidelines of the horizontal merger. The arguments as well as the evidence provided by AT&T in the application were found to be insufficient to ignore the presumption of increase in market power. According to the guidelines, the concentration of the market and the share of the market are measured on the basis of revenues. The products can be differentiated in the market and therefore revenues will act as the relevant parameter for measurement. If the revenues are fully attributable to the facilities based carriers, The Herfindahl-Hirschman Index would result to 3356 for the wireless market while the increase in index would be 741. On the other hand if the subscribers of the resellers are fully attributed to the resellers, then the index on the basis of revenue would be 3279 and the increase in the index would be 727. Therefore both the approaches show the market power is getting enhanced as a result of the merger. T-mobile continued to remain a strong player in the market. The other players lacked the competency to deal with the slack resulting from the elimination of T-mobile from the market. The effects of anti-competition could not be rubbed off completely as the resulting inefficiencies were not up to the mark (Goldfarb, 2011). The competitive disadvantages of the competitors rose. The effect was felt on quality and costs. The costs took the steep rising curve with poor standards of quality. The power of the competitors was limited and the roaming services felt the heat. AT&T and T-mobile offered the same quality of product under different conditions and at different prices. The authorities have to evaluate the national market and the local market separately as the price ranges kept on changing. The competitive effects on both markets were evaluated. A concern at the national level may not be a concern at the local markets and vice versa. The effects of the merger on the consumers would have been two folds. The subscribers of T-mobile will be left with no other option but to avail the highly priced smart phones and data services from AT&T instead of the affordable data plans of T-mobile. The objective of AT&T in the merger was to enhance the consumer base (Besen, Kletter, Moresi, Salop and Woodbury, 2012). If the consumers of T-mobile come under the umbrella of AT&T significant amount of revenues will be generated and AT&T can gain the same level of profits. The customers will have to feel the pinch on the pockets by paying higher charges and also compromise of the quality of service. If T-mobile can be rubbed off from the market scenario, AT&T ...Download file to see next pagesRead More
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