(The Hosting News) – AT&T today announced their decision to acquire T-Mobile for approximately $39 billion in cash and stock. This agreement was approved by the board of directors from both companies and will probably end the commercials T-Mobile ran making fun of the AT&T network. The merger could affect millions of wireless users in the United States through possible sales of iPhones to the T-Mobile services. While this merger is under way it still has the obstacle of Obama’s administration and the possibility of the merger being challenged in court.
Certain statutory laws and regulations in the U.S. prohibit “unfair trade practices.” A merger could establish a monopoly that would represent a “restraint of trade” by forcing competitors our of the market and limiting choices for the consumer. The current residing presidential administration is responsible to govern deals and decide if such a merger could constitute such a violation of regulations and if it is worth prosecuting in regards to.
AT&T’s acquisition of T-Mobile would create the second and fourth largest wireless providers in America. Verizon is ranked first with 100 million customers, which AT&T currently holds about 95 million. T-Mobile has 34 million customers to date. With the acquisition AT&T would be lined up to hold approximately 37% market share of the wireless industry. While some economists would not declare that a 37% market share defines a monopoly, they do believe that the larger share may allow AT&T to further undercut prices of competitors to create one.
AT&T has stated that it plans to use the merger to expand its network and make broadband available to more Americans. Customers of both of these companies could potentially start gaining new options and benefits if the merger goes through. Typically these types of deals are reviewed by the Free Trade Commission before the agreement is finalized and the merger takes place. If the deal is not approved it does not mean the merger cannot happen. Rather, it will mean that both companies my continue with the merger but with threat of antitrust legal action being taken by the Justice Department. At this time it is unclear, if the merger is not accepted under current administration, if either company would be willing to move forward in full knowledge of the possible court injunction. Future administrations may also decide later to sue and break up the company.
Before the merger can more forward, it must undergo a mandatory 30-day review process mandated by the Hart-Scott-Rodino Antitrust Improvements Act. While 95% of deals are made and completed during this 30 day process, the other 5% of transactions usually require more documentation showing proof that the merger would not be a restraint on trade. This process can take months and potentially require millions of dollars in legal fees. In addition to this, investors may grow worried about the deal causing stock prices of both companies to fall. Potential acquisitions often have a chance to be killed simply by the FTC delay.