Following AT&T’s announcement that its merger with Bellevue-based T-Mobile USA will bring 5,000 jobs back to the U.S. The company says it will bring back 5,000 call-center jobs to the U.S. that had been moved abroad. AT&T also promises to maintain all of AT&T’s and T-Mobile’s more than 25,000 call-center jobs in the U.S.
The Justice Department has on Wednesday, Aug 31, filed an Federal antitrust lawsuit (embedded below) in federal court in Washington, D.C., to block AT&T’s proposed $39 billion takeover of T-Mobile.
DOJ believes an acquisition of the country’s fourth largest wireless carrier by AT&T, the second largest wireless carrier, would reduce innovation, lessen competition, create higher prices for consumers and result in a decline in the quality of service because there would be less incentive to invest in capacity and technology improvements.
The Justice Department’s antitrust lawsuit to block AT&T’s acquisition of T-Mobile, was necessary to “ensure that competition remains and that everyone – including consumers, businesses and the government,” said Deputy Attorney General James Cole. “We are seeking to block this deal in order to maintain a vibrant and competitive marketplace that allows everyone to benefit from lower prices and better quality and innovative products,” Cole said.
The complaint especially notes that T-Mobile “is well known to be an important driver of economic growth” and an “innovator in terms of network development and deployment.”
T-Mobile “firsts” include the first Android handset, Blackberry wireless e-mail, the Sidekick (a consumer “all-in-one” messaging device), national Wi-Fi “hotspot” access, and unlimited service plans.
The Justice complaints highlights the fact that T-Mobile was the first company to roll out and market a nationwide 4G network based on advanced HSPA+ technology.
“Such investments in new network technologies -spurred by competition among the Big Four -are valuable to consumers as they increase the efficiency of spectrum use and allow for more mobile wireless services output,” the Justice lawsuit says.
The complaint also hones in on T-Mobile’s position in the marketplace as “the value option for wireless services, focusing on aggressive pricing, value leadership, and innovation.”
The lawsuit says that T-Mobile responded to disappointing results by shaking up management and launching a plan to “revitalize the company by returning to its roots as the industry value and innovation leader” in the marketplace:
“A key component of T-Mobile’s new strategy is to offer “Disruptive Pricing” plans to attract the estimated 150 million consumers whom T-Mobile believes will want a smartphone but do not yet have one. T-Mobile’s CEO Philipp Humm defined as “disruptive” a rate plan that “Verizon and AT&T can’t match.” T -Mobile has designed its new aggressive pricing plans to offer services, including data access, at rates lower than those offered by AT&T and Verizon, and it projects that the new plans will save consumers several hundred dollars per year as compared to similar AT&T and Verizon plans.”
The suit contends that T-Mobile’s disruptive pricing places competitive pressure on its larger rivals and, without it, prices will rise and innovation will plummet.
The complaint also said the merger would create a massive company with more than 40 percent of the mobile market share, and closer to 50 percent market share in major metropolitan markets such as Seattle, Houston, Honolulu and Dallas.
DOJ said used a variety of methods to evaluate the merger, but placed great emphasis on the Herfindahl-Hirschman Index (HHI), which measures market concentration. “We conducted dozens of interviews of customers and competitors, and we reviewed more than 1 million AT&T and T-Mobile documents,” said Pozen. “The conclusion we reached was clear. Any way you look at this transaction, it is anticompetitive.”
Applying this to the AT&T-T-Mobile deal, DOJ found that, nationally, the proposed merger would result in an HHI of more than 3,100 for mobile services, an increase of nearly 700 points.
In a statement, AT&T said it was “surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated.”
Some members of Congress have turned up the heat on the deal. In a letter to regulators, U.S. Sen. Al Franken, D-Minn., and several other lawmakers said the T-Mobile deal would lead to major job losses:
The merger of AT&T and T-Mobile would likely involve thousands, perhaps even tens of thousands, of layoffs. Despite having been asked directly by me and several other members of Congress to provide estimates of the number of layoffs AT&T is expecting to result from the merger, AT&T has refused to release this information. According to recent reports, AT&T employs 266,590 people and T-Mobile employs 37,795.54 AT&T has calculated that it will reap $3 billion per year in “operational savings” and “cost synergies” as a result of the merger.
While it will not discuss what portion of these “synergies” comes from the elimination of jobs, I think it is fair to assume that layoffs constitute a substantial portion of the cost savings AT&T is promising to its investors.