Mergers & Acquisitions

Mergers & Acquisitions

August 04, 2011

AT&T/T-Mobile Merger Will Have Adverse Effect on Consumer Interests: Yankee Group

The $39 billion deal between AT&T and T-Mobile USA will affect consumer interests, according to Yankee Group (News - Alert).

To arrive at this conclusion, Yankee Group analyzed its consumer data and used the U.S. Department of Justice's market concentration metrics.

Yankee Group said the merger between the two leading telecom operators will increase market concentration, decrease competition and raise average mobile prices.

The market intelligence firm has urged the telecom regulator FCC to block the merger unless it plans to take a stronger regulatory stance.

“We believe this merger will reduce choices for consumers and, more importantly, leave little incentive for AT&T (News - Alert) to offer competitive pricing for unbundled mobile services,” said Gigi Wang, chief research officer, Yankee Group, in a statement.

According to the report called, “AT&T/T-Mobile (News - Alert) Merger: More Market Concentration, Less Choice, Higher Prices,” the merger will give AT&T more than a 50 percent market share in five major markets such as Dallas, Houston, Miami, San Francisco and St. Louis.

The combined entity will grow the number of highly concentrated top 27 cellular markets from 1 to 17, reducing network choices in those markets.

There are also possibilities for increases in mobile phone bills in seven major markets including Seattle and Houston that would see mean increases of more than $5 per month; and Boston, Dallas, Los Angeles, Miami and New York that would see increases of less than $5 per month.

The Yankee Group suggested that the DoJ and FCC (News - Alert) should consider creating a new mobile service provider from smaller competitors or requiring the merged companies to cede a portion of their customers to a mobile virtual network operator (MVNO) operating on their network.

In fact, the telecom industry is divided over the issue of the merger. Recently, The Communications Workers of America reiterated its position that the proposed merger between AT&T and T-Mobile is good for both consumers and American workers. The workers union recently shared their comments with the California Public Utilities Commission on the proposed merger between AT&T and T-Mobile.

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Rajani Baburajan is a contributing editor for TMCnet. To read more of Rajani's articles, please visit her columnist page.

Edited by Jamie Epstein

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