AT&T (s t) filed its response to the Department of Justice’s lawsuit that attempts to stop Ma Bell’s $39 billion acquisition of T-Mobile USA Friday, and the response can be summed up as: T-Mobile is a pathetic loser of a phone company that provides no benefit to society, but if we can take it over, it’s a win for everyone, especially our customers, who will get better service.
From the AT&T response:
Defendants respond that T-Mobile is losing customers and subscriber shares in a growing market, is not a unique or material competitive constraint on AT&T (s T), and will not be one going forward in the absence of this transaction.
Without this merger, AT&T will continue to experience capacity constraints, millions of customers will be deprived of faster and higher quality service, and innovation and infrastructure will be stunted. If this transaction does not close due to Plaintiff’s lawsuit, wireless consumers will, as the FCC Chairman predicts, increasingly face higher prices and lower quality.
Yes, T-Mobile is now a makeover candidate. Of course, if this were a TLC (s disca) or Bravo (s cmcsa)(s ge) makeover show, Ma Bell would be this dashing, debonair phone company that provides awesome service and prepares T-Mobile to do the same, but this is real life. Unfortunately for AT&T, its service has had hiccups and its arguments to the DOJ that those hiccups will continue and consumer prices will rise unless it gets T-Mobile sound more like blackmail than a statement of unmitigated truth. After all, this is the same company that skimped on network upgrades for years and also shared that it planned to stop its LTE network at 80 percent of the U.S. because going further wasn’t economical.
AT&T is trying to portray T-Mobile as a dog that doesn’t act as true competition in the mobile market and may not stick around, but also as a vital source of infrastructure for AT&T, which is in need of the spectrum that only T-Mobile can provide. AT&T also seems to deny basic math in its filing, but I think it’s signalling that it’s both preparing for and will concede to some customer divestitures as part of the merger:
10. Pursuant to the Transaction Agreement, AT&T will acquire T-Mobile for cash and stock worth approximately $39 billion. If this transaction is consummated, AT&T and T-Mobile would become the nation’s largest wireless carrier. The merged firm would have approximately 132 million connections to mobile wireless devices in the United States, with more than $72 billion in mobile wireless telecommunications services revenues.
Response: Defendants admit the allegations in the first two sentences of this paragraph. Defendants deny the remainder of the allegations in this paragraph.
As one reads deeper, AT&T’s denials and refutations of the Justice Department’s arguments get more and more bizarre. AT&T admits that people buy telephone service locally, but denies that consumers take into account the places they work, live and travel to when considering a cell phone provider.
It also denies that it seeks to set prices and plans at a nationwide level based on the pricing plans set by Verizon, (s VZ) Sprint (s S) and T-Mobile. That’s despite having said as much three years ago, and despite changing its pricing plans within days of Verizon doing so in terms of offering an unlimited plan, and also following Verizon in raising its early termination fees (side note, Sprint recently also raised its ETF to the same price that AT&T and Verizon have set).
In places where the evidence is particularly damning, such as quotes from internal AT&T documents citing T-Mobile as a competitor, AT&T shoos away those allegations as being taken from unidentified documents and out of context. The entire argument that AT&T is making boils down to an assertion that T-Mobile isn’t a real competitor to AT&T, yet smaller regional players and even new entrants could be, and that the public would love this merger because it would improve AT&T’s ability to offer wireless service.