The positive side of the AT&T-T-Mobile merger


Jeremy Hobson: You know that $39 billion AT&T takeover of T-Mobile? The one that would reduce competition in the world of cell phone service? Well for some reason, it's got our economics correspondent Chris Farrell very excited. He joins us now. Hi Chris.

Chris Farrell: Hey Jeremy.

Hobson: So why are you so excited about this big AT&T-T-Mobile deal that we found out about this week? I mean, everyone says it's going to be terrible for consumers.

Farrell: But it's good news for the economy. Think about it this way, Jeremy: CEOs for the past couple of years have been scared. They've been in a survival mode. Well, they're now leaving the bunker. They're willing to take a risk; they're going to buy a business, they're going to expand. And so, the famous phrase of John Maynard Keynes: Animal spirits of capitalism, at least in the executive suite, are being unleashed.

Hobson: Why are they being unleashed right now? We've still got a lot of uncertainty in places like Libya and Japan. Why are CEOs so ready to jump into the marketplace again?

Farrell: The signs have been growing that this economy is doing better. So I think it is a time to consolidate your business, to expand your business, if that's what you want to do. And if the economy's getting better, the safe forecasts will say: interest rates are going to go up and therefore, an acquisition would be more expensive down the road.

Hobson: And what do these mergers and acquisitions, if we're about to get into a big M&A boom, what does this mean for the rest of us?

Farrell: Well we have a lot of experience with this, and what we know is that it means in companies where you have the mergers, there's going to be a lot of job losses because you're going to get rid of redundant positions, right? That's just what happens. And you have to justify the costs and all the efficiencies. And then in certain industries where you're having a lot of consolidation, you start eliminating the competition -- again, a lot of job losses. If you take a look from the perspective of the overall economy, however, it's that famous phrase by Joseph Schumpeter: creative destruction. I think we're seeing more growth, I think we're seeing more opportunity. So overall, job creation. But if you're in the wrong place at the wrong time, job losses.

Hobson: Marketplace's economics correspondent Chris Farrell. Thanks Chris.

Farrell: Thanks a lot.

About the author

Chris Farrell is the economics editor of Marketplace Money.
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Mr Farrell,
I have read your comments and was not able to summon up an exact positive sites of merger.
I have presentation tomorrow about merger of Att and T-mobile about what positive effect will this merger bring? I have to convince the audience that this merger is good idea for economy, consumers. could you please point out more clear examples because the way you explained above did not really make sense to me.

This is pretty much standard Farrell fare. He seems to live on a different plane from the rest of us--with his schizophrenic commentaries. Good is bad. Bad is good. That sort of thing.
If there were lifeboats, he is bound to see them as some sort of economic problem for the country. But if i have one, MaryJo, you are welcome to share it.

Mr. Farrell,

There is nothing positive about the proposed sale of T-Mobile to AT&T.

This is in no way in the best interest of consumers. I hope that the FCC grows a spine and does not let this sale happen. The job losses and the loss of a low cost wireless carrier are enough to give this deal a big thumbs down.

Mr. Farrell, I usually agree with your commentary but I think you are way off base on this one.

An utterly preposterous commentary. "Consolidation" is NOT a sign of "expansion," as Mr. Farrell implies, it's 100% defensive and monopolistic.

The next report we'll hear will be of massive layoffs at the combined companies, as management "discovers" the inevitable "redundancies." Who needs two complete marketing departments, two complete human resources departments, two complete accounting departments, two complete customer service departments, etc., etc.? The layoffs alone will offset much of any premium AT&T must pay for T-Mobile.

The fact is, the merger will create "efficiencies" that will increase corporate profits while greatly reducdcing consumer choice (i.e., consumer leverage). The natural next step is to raise prices, since consumers no longer have so many alternatives to which to flee.

Mr. Farrell has apparently drunk the corporate kool-aid. Consolidation enriches the company and its stockholders, but is almost always a setback for consumers.

Mr. Farrell,

Do you realize how awful you sound?

The merger will be terrible for consumers but "good news for the economy"? Are you serious? Since when did consumers and the economy become adversaries? Or do you mean by "the economy" all those cheery CEOs to which you refer repeatedly?

A lot of jobs will be lost but, "That's just what happens." (I am reminded of my teenage neighbor who walks around inanely mumbling "Hey, s*** happens, man." Not the most thoughtful commentary on anything.)

"Creative destruction"? The phrase sounds a little creepy to me. It resonates too closely with "collateral damage."

God, I fervently pray this morning that Mr. Farrell and I never, never, NEVER have to share a lifeboat!

MaryJo Thomas, Ph.D.

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