March 21, 2011
AT & T Plus T-Mobile Equals Merger Guidelines Fun
Posted by Christine Hurt

So, to give you a snapshot of what experts are saying about the announcement that AT & T is buying T-Mobile USA for $39 billion, here is a conversation that took place on Saturday:

ME:    AT & T is buying T-Mobile. 

IN-HOUSE ANTITRUST EXPERT:    No, they're not.

In a nutshell, the deal will have to overcome some regulatory hurdles, including governmental approval from the DOJ/FTC under the merger guidelines.  Though most mergers have sailed through in the past decade, this would be the first chance to see whether the Obama administration will continue the Bush-era hands-off tradition or vigorously scrutinize a transaction that will result in one company having about 130 million U.S. subscribers.  (Yes, more than a third of all potential subscribers, from infants to centenarians.)  The battlefield in merger review usually focuses on identifying the market, and from there regulators decide whether the transaction will result in loss of competition in that market, how much, etc.  Here, AT & T is going to argue for a city-by-city market analysis, not a nationwide analysis, because apparently AT & T doesn't look like a future monopolist in match play. 

Normally, I like to look at the market to see whether investors think the deal will come through.  Here, AT & T is buying T-Mobile USA from Deutsche Telekom.  The parent compoany delisted from the NYSE last year, but trades its American Depositary Shares (DTEGY) on the OTCQX and its own shares in Germany and other OTC exchanges.  The ADS share price is opened up this morning, and the price for T-shares seems to be going down somewhat today.  I'm no event study expert, but I'm assuming it's hard to separate out the transaction from the volatility in the markets over Japan, Libya, etc.

Maybe AT & T should just show the FTC Verizon's ad campaign, which seems to suggest that AT & T is not a threat to anyone:


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