AT&T’s plan to buy T-Mobile USA for $39 billion will create a new leader in the U.S. wireless market. Analysts call the move by second place AT&T to gobble up the fourth place carrier bold and surprising.
Michael Hodel from Morningstar said, “A week ago if you had asked us, we would have said, there is absolutely no way AT&T would attempt to do a deal like this. Nothing of this scale has really been attempted in the wireless industry up until to this point. So, we think there are clear hurdles that will have to be overcome to win regulatory approval for this deal.”
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Analysts say it’s a sweet deal for AT&T, because it would add capacity to its network often criticized for poor performance. Wireless companies like AT&T have been trying to ramp up to meet the ever increasing demand for videos and data from devices such as Apple’s iPhone. But for consumers it would mean fewer choices.
Scott Stein at CNET.com says the horse race is narrowing, “Anytime you lose an option out there, it’s hard to say that’s it’s a real advantage for the consumer.”
If regulators approve the deal, AT&T would swell to 130 million wireless customers or roughly 43% of the market. Verizon would be in second place with 34.5% and Sprint a distant third. It’s not just size that matters. Taking T-Mobile out of the equation removes one of the lower priced options for consumers.
Stein adds, “T-Mobile has sort of helped keep AT&T in check in the U.S. as far as pricing and providing another option for people. That won’t be there, so there is a concern prices may get higher.”
The only reprieve? The deal faces such intense antitrust scrutiny that it may be a year or more before consumers see any impact.
Bottom Line: AT&T’s plan to buy T-Mobile USA for $39 billion raises concerns wireless prices may rise as consumers’ choices drop.