The U.S. Justice Department has sued to block AT&T’s proposed $39 billion takeover of T-Mobile USA and the development will have a telling impact on the investment plans of AT&
This will be a big blow to AT&T’s initiative to build the largest U.S. cellphone carrier. The uncertainty is likely to block AT&T’s network investments. Recently, AT&T has committed as part of the T-Mobile merger to increase its U.S. infrastructure investment by more than $8 billion.
AT&T was trying to rely on T-Mobile’s 4G network. If the merger does not materialize, AT&T will be forced to plan its own LTE investment. Its main concern will be lack of spectrum.
Deutsche Telekom will be prompted to look for another partner or go ahead with its own investment and expansion plan.
According to an analysis by the Economic Policy Institute that commissioned by the Communications Workers of America, AT&T’s increased investment is estimated to produce up to 96,000 new U.S. jobs. Considering the current move, the U.S government is not concerned about job opportunities created by the AT&T T-Mobile deal.
The U.S. government said the combination of the second- and fourth-largest cellphone companies in the U.S. will harm competition and likely raise prices for consumers. In the last five months, the merger move created a number of debates.
The following is the market share of US wireless operators in Q2 2011
Verizon: 106.3 million
AT&T: 98.8 million
Sprint: 52 million
T-Mobile: 33.6 million
This will now create a massive uphill battle for AT&T in consummating its merger, and will create significant delays. At worst, it will prevent the merger from happening entirely, which will result in a massive breakup fee of several billion dollars and various other concessions on the part of AT&T,” said Jan Dawson, chief telecoms analyst at Ovum.
T-Mobile with 33.6 million mobile users has been a disruptive competitor in the market. AT&T’s intention to acquire T-Mobile was motivated by spectrum and network concerns. The US advises AT&T to invest in its own network.
Recently, AT&T committed that after closing its proposed merger with T-Mobile USA, it will bring back 5,000 wireless call center jobs to the United States that today are outsourced to other countries.
In addition to bringing jobs back, AT&T committed that the merger will not result in any job losses for U.S.-based wireless call center employees of T-Mobile USA or AT&T.
At a time when many Americans are struggling and our economy faces significant challenges, we’re pleased that the T-Mobile merger allows us to bring 5,000 jobs back to the United States and significantly increase our investment here,” said Randall Stephenson, chairman and CEO, AT&T.
According to Ovum, this is not the first case to be known as United States vs. AT&T – an earlier case in the late 1970s and early 1980s led to the breakup of the then-monopoly AT&T into eight separate companies. AT&T and other companies have been working hard over the last ten years to put many of those pieces back together, beginning with the mergers of Pacific Telesis, Ameritech and Southwestern Bell, and followed by the acquisitions of AT&T, BellSouth and Cingular by SBC. The fact that the Department of Justice is stepping in now is a sign that it wants to draw a line in the sand and forbid further consolidation among major players in the industry, and especially AT&T.
By Baburajan K
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