Congress tackles AT&T and T-Mobile merger
Executives at AT&T attend a news conference where it was announced that AT&T Inc. will be buying its wireless rival T-Mobile USA from Deutsche Telekom AG for $39 billion in cash and stock on March 21, 2011 in New York City.
STEVE CHIOTAKIS: The CEOs of AT&T and T-Mobile are on Capitol Hill this morning, they're trying to convince lawmakers their companies should be allowed to get together. The $39 billion deal is getting a lot of scrutiny because it'll create the nation's largest mobile phone giant and means just two companies -- AT&T and Verizon -- would control 75 percent of the market.
Marketplace's John Dimsdale is live with us from Washington with the latest on that story. Good morning John.
JOHN DIMSDALE: Good morning Steve.
CHIOTAKIS: It seems like all these big proposed mergers are criticized at first, but they do eventually get approved.
DIMSDALE: Yeah you're right. Over the past few years regulators, especially in the communications field, have been reluctant to step in when businesses argue that they have to be big to keep technology going forward. Remember that the mergers between Comcast and NBC, and Sirius and XM, were criticized when first proposed.
But Carrie MacGillivray a mobile phone industry analyst with International Data Corporation says size really does matter.
CARRIE MACGILLIVRAY: The cost of building a network is overwhelming. So if they can get some critical mass by bringing together assets of both T-Mobile and AT&T it can help defray some of that cost.
CHIOTAKIS: All right, but at what point John do regulators say this really is too much consolidation -- joining these big companies together doesn't leave enough choice for consumers.
DIMSDALE: Well, they thought Microsoft crossed the line when it offered its browser for free to put competing browser software companies out of business. But that tipping point is subjective. The Bush administration they wouldn't intervene unless there was "substantial anticompetitive harm." The Obama administration withdrew that standard, saying it leaves too many big merged companies with too few competitors. But if this T-Mobile/AT&T deal is allowed to go through, AT&T is promising a lot better service.
CHIOTAKIS: Marketplace's John Dimsdale. Thanks.
DIMSDALE: Thanks Steve.
JEREMY HOBSON: The proposed AT&T-T-mobile merger takes center stage in Washington today. The heads of each company will tell members of Congress that if the two become one competition won't be reduced. That may raise the eyebrows of some lawmakers but analysts expect the merger will get the go-ahead.
Our Washington bureau chief John Dimsdale explains why.
JOHN DIMSDALE: In recent years, anti-trust regulators have been reluctant to challenge big mergers -- approving combinations of Comcast and NBC, Sirius and XM and Live Nation and Ticketmaster. But the Obama administration's Justice Department has vowed to be a stronger enforcer of anti-competitive mergers.
But telecom analyst Jeff Kagan says this merger has merit, because AT&T needs the airwaves that T-Mobile can give them.
JEFF KAGAN: The customers that have had a bad experience with the Apple iPhone, trying to just overwhelm the system with wireless data. They need more capacity, so this is something that would benefit AT&T.
The combination of the nation's second and fourth largest wireless phone providers would create a massive company of 130 million cell phone customers. AT&T would leapfrog the biggest cell phone company, Verizon. Between and the two of them, AT&T and Verizon would control over three-fourths of the market.
In Washington, I'm John Dimsdale for Marketplace.