The Day After: More Reaction To DoJ’s AT&T/T-Mobile Civil Suit

The PR machine was working overtime last night as the initial shock began to wear off from yesterday’s U.S. Department of Justice announcement that it was filing a civil suit to block the proposed AT&T/T-Mobile merger (for more on that, click here). AT&T, of course, has vowed to put its entire legal wherewithal into the court battle.

After speaking with CT Reports briefly following DoJ’s decision, Medley Global Advisors analyst Jeffrey S. Silva wrote an extended in-depth e-mail that said in part: “DoJ’s suit could initially also be regarded as a positive for a host of other players in the industry, including distant Number 3 national wireless competitor Sprint Nextel, Clearwire, regional operators Leap Wireless and MetroPCS, small wireless carriers, tower companies, handset/infrastructure equipment vendors and wireless ecosystem suppliers generally.

“Litigation is all about risk. AT&T’s acquisition ambition is now at risk, with incumbent financial obligations if the purchase of T-Mobile completely unravels. But there are legal and political risks for the Obama administration as well. The U.S. government has a mixed record of pursuing litigation to halt mergers. A court case loss could lessen the Obama administration’s ability to impose consumer protection/competitive safeguards than if DoJ and AT&T reached a negotiated settlement.”

The following comments are a sampling of what CT Reports has seen during the past 24 hours:

• Philipp Schindera, executive vice president/Corporate Communications at T-Mobile USA parent company Deutsche Telekom: “Deutsche Telekom is very disappointed by the DoJ’s action and will join AT&T in defending the contemplated merger against the complaint in court. DoJ failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction, which would lead to significant customer, shareholder and public benefits. We appreciate the DoJ’s willingness to discuss possible remedies to address the competitive concerns.”
• Jerry James, CEO at COMPTEL: "COMPTEL is thankful the Department of Justice recognized the substantially negative impact this merger would have on competition and has taken the appropriate action of filing an antitrust lawsuit to block AT&T’s acquisition of T-Mobile… In today’s tough economy, loss of more jobs is of great concern. This morning, Sprint released the results of independent analysis done by David Neumark, professor of economics and director of the Center for Economics and Public Policy at the University of California at Irvine, debunks assertions made by AT&T that its proposed takeover of T-Mobile would be good for American jobs. The study reveals that this acquisition will almost certainly lead to the elimination of thousands of American jobs as the company works to lower its capital expenditures by $10 billion.”
• The U.S. Hispanic Chamber of Commerce: “The USHCC is concerned that Department of Justice’s lawsuit will delay economic growth and job creation for our businesses that are anxiously awaiting the opportunities that will result in light of the AT&T/T-Mobile merger. AT&T’s exemplary commitment to the Hispanic community and overall job creation demands for a speedy approval of the proposed merger…If the merger is approved, procurement spend with our community will continue to increase, and AT&T has pledged to augment their supplier diversity program by developing and sourcing existing and new Hispanic-owned enterprises through technical assistance and capacity building initiatives, as well as sponsoring matchmaking events to connect AT&T buyers with Hispanic suppliers.”
• Rep. Ed Markey (D-Mass.): “The Justice Department’s decision to take action to block AT&T’s purchase of T-Mobile is a victory for competition, consumers and choice. We should be protecting American consumers holding their cell phones, not just telecommunications titans holding stock in the companies. The merger would reduce the number of national wireless companies from four down to three, sending the mobile marketplace into a telecommunications time machine back to 1993. That would be an historic mistake.”
• Luke Pelican, policy fellow at the Competitive Enterprise Institute: “Contrary to the Justice Department’s assertions, competition would likely thrive as a result of the proposed deal. A more robust AT&T would increase pressure on Sprint and Verizon Wireless to compete against the combined company, while allowing competitors to cull dissatisfied customers from AT&T should the company increase prices. On the other hand, the cell towers and spectrum AT&T will gain as a result of the deal will bring greater coverage for its customers, especially in dense urban areas. AT&T’s move to LTE-based technology would also benefit T-Mobile users who are currently served by that company’s HSPA+ network…As it stands today, T-Mobile is in a compromised position, as it lacks a viable path forward in the competitive wireless market…Should the Justice Department succeed in blocking the deal, it will leave millions of consumers with obsolete technology and inferior service. Together, AT&T and T-Mobile will provide consumers with greater benefits than the two firms will if they go it alone.”?
• Harvey Rosenfeld, founder, Consumer Watchdog: "The last thing beleaguered American consumers need right now is higher prices and shoddier cellphone service. That’s exactly what would happen if AT&T was permitted to buy T-Mobile.”
• Craig Moffett, Bernstein Research: “AT&T’s acquisition of T-Mobile can be considered all but definitively dead…This clearly came as a significant shock to executives at both companies. But perhaps the most significant take-away…is that the end of the AT&T/T-Mobile deal is likely to be bad for all the U.S. carriers. There’s no good way to spin this for AT&T. They lose a key driver of synergies and, therefore, earnings growth in 2012 and beyond. And they face a more dire spectrum shortfall, suggesting the need for higher capital spending and/or additional spectrum purchases.”
• Debra Berlyn, director of the Consumer Awareness Project and president of Consumer Policy Solutions: “While I respect the Department of Justice’s review and cannot speak to antitrust statutes, I continue to believe that the merger would result in benefits to consumers. Over the past few months, I have recognized the benefits that the union of these two companies could bring to consumers. Consumers should have access to reliable broadband Internet, and those in rural communities or unserved areas who are often left with slow speeds and unreliable performance, would have the opportunity to experience quality access following AT&T’s proposed merger with T-Mobile.”
• Christopher M. Larsen, Piper Jaffray: “What happens if the deal is dead? T-Mobile USA lives on, for now, although it is a company with a reluctant owner and likely not enough spectrum to build a LTE network on its own. Sprint has been discussed as a possible suitor and, although combining the two weakest national carriers could be viewed more favorably by the DoJ, approval is not a certainty as the DoJ comments indicated preference for four national carriers. If any combination of the national carriers is off the table, they may look to prepaid providers Leap and MetroPCS for scale and spectrum; additionally, spectrum plays like DISH or LightSquared could become more attractive as an acquisition or viable on their own.”