On Wednesday, the U.S. Justice Department filed a lawsuit opposing the AT&T and T-Mobile merger, a $39 billion deal that would create the largest cell phone carrier in the country. The government opposes the merger on the grounds that it would "substantially lessen competition." The news sent AT&T stock tumbling, but had others cheering. AT&T maintains that it will press on in court, but many are doubtful the carrier will prevail. Here, a brief guide to the winners and losers:
"Things are looking a little sunnier" for Sprint, says Dan Howley at LAPTOP. The country's third-largest wireless carrier, worried it would be battered by an AT&T-T-Mobile behemoth, had strongly opposed AT&T's proposed deal, claiming it "would reverse nearly three decades" of government intervention to keep U.S. communication markets open. Sprint's stock jumped after the lawsuit was announced.
This lawsuit could help Verizon stay on top, says Larry Dignan at ZD Net. AT&T's acquisition of T-Mobile was pitched as a way to "boost 4G services, build out its network, alleviate a wireless spectrum crunch, and boost jobs." Now those improvements are unlikely, suggesting that Verizon will remain an industry leader. And while AT&T's distracted in court, Verizon can poach customers from its lawsuit-saddled rivals.
In a statement, Deputy Attorney General James M. Cole cited consumer choice as the reason for blocking the merger. The deal would have meant "higher prices, fewer choices and lower quality products for mobile wireless services… This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition." Plus, Dignan says, "consumers may garner good deals as T-Mobile moves heaven and earth to keep current customers and attract new ones."
If the deal doesn't go through, AT&T would have to pay $3 billion in cash as a breakup fee, and share a portion of it wireless spectrum with T-Mobile USA. That could bring the value of the "kill package" as high as $7 billion. "After trying an opportunistic shortcut to solve its spectrum and growth challenges, AT&T will now have to fight it out in the trenches," says Martin Peers in The Wall Street Journal.
Sure T-Mobile may pocket that breakup fee, but "AT&T and T-Mobile have both put enormous amounts of management time and shareholders’ money into putting this merger together, all of which will now be for naught," says Felix Salmon at Reuters. Unsurprisingly, T-Mobile shares were down in Wednesday trading.
The job market... maybe
AT&T claims the merger would bring 5,000 previously outsourced call-center jobs to the U.S. — which would mean this lawsuit costs America jobs. That's "cynical and misleading," says Sam Biddle at Gizmodo. "However many jobs AT&T magically creates with this merger, they'll likely be eliminating just as many thousands, since that's the kind of 'cost-reducing synergies' or whatever that companies merge for in the first place."