The AT&T merger’s trust issues

Adriene Hill Dec 20, 2011

Adriene Hill: After months of back and forth AT&T has dumped its $39 billion deal to take over T-Mobile. They just couldn’t come up with a plan that made regulators happy.

Joining us now to explain why is Daniel Crane. He’s a law professor at the University of Michigan. Good morning.

Daniel Crane: Good morning.

Hill: What were the specific concerns that regulators had about this deal?

Crane: Well there were really two concerns. One is that on a national level, T-Mobile has been an innovator, it has been a firm that has led to price discounting in the market. And because of the merger, that kind of competition would cease.

Secondly, there was a concern on a market by market basis that the merger would lead to many customers only having a choice of two different carriers, and that kind of local market competition would be lost.

Hill: And what’s next now for AT&T?

Crane: AT&T will have pay a $4 billion breakup fee to terminate the merger, and is going to take that as a charge. It will continue to explore the possibility of expanding its wireless spectrum; it has a roaming deal with T-Mobile that will try to tap into some of the areas where T-Mobile has more spectrum than AT&T does.

Hill: Now when you say spectrum, what do you mean?

Crane: Spectrum means the wireles capacity to carry calls.

Hill: So fewer dropped calls?

Crane: Fewer dropped calls, right.

Hill: And what’s next for T-Mobile?

Crane: T-Mobile has made it clear that it doesn’t view itself as being able to survive in this market alone. It may now try to partner with a smaller carrier in the market.

Hill: Daniel Crane is a law professor at the University of Michigan. Thanks so much.

Crane: My pleasure.

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