For Immediate Release - December 19, 2011

AG Coakley Statement RE: AT&T’s Decision to Abandon Proposed $39 Billion Merger with T-Mobile

BOSTON – Today, AT&T announced that it will abandon its proposed $39 billion merger with T-Mobile USA.

On September 16, 2011, Attorney General Martha Coakley, along with attorneys general from six other states, joined the Department of Justice's (DOJ) amended lawsuit to block the merger between the cell phone giants. Her office argued that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services in Massachusetts and across the United States.

The following is a statement from AG Coakley on the decision by AT&T to abandon its proposed merger with T-Mobile

“This is good news for Massachusetts consumers and businesses. We believed the proposed merger would have significantly reduced competition, likely resulting in higher prices, poorer service, and stifling choice and innovation for cell phone users in Massachusetts. With today’s announcement, we are pleased that will now no longer occur.”

BACKGROUND

Mobile wireless telecommunications services play a critical role in the way Americans live and work, with more than 300 million feature phones, smart phones, data cards, tablets and other mobile wireless devices in service today. Four nationwide providers of these services - AT&T, T-Mobile, Sprint and Verizon - account for more than 90 percent of mobile wireless connections. The proposed acquisition would have combined two of those four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing.

According to the complaint filed, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation's largest 100 cellular marketing areas. Four of these markets are in Massachusetts, including in the greater Boston, Worcester, Springfield and New Bedford/Fall River areas. AT&T's acquisition of T-Mobile would have eliminated a company that has been a competitive force through its low pricing and innovation. AT&T had argued that the proposed merger would create efficiencies, but the AG’s office contended that these claims were either untrue or outweighed by the anticompetitive harm.

The complaint cited a T-Mobile document in which T-Mobile explained that it had been responsible for a number of significant "firsts" in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi "hotspot" access, and a variety of unlimited service plans. T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology. The complaint stated that in January 2011, an AT&T employee observed that "[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims."

The complaint detailed other ways that AT&T felt competitive pressure from T-Mobile. The complaint quoted T-Mobile documents describing the company's important role in the market:

  • T-Mobile sees itself as "the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market"; and
  • T-Mobile's strategy is to "attack incumbents and find innovative ways to overcome scale disadvantages. [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small. Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . ."

The complaint also stated that regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers. Moreover, any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction's anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.

This matter is being handled for Massachusetts by Assistant Attorneys General Michael Franck and Michael MacKenzie; Paralegal Helen Hood; and Division Chief Will Matlack of the Antitrust Division.

##########

Follow us on Twitter – View our Photos – Visit our Website