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AT&T T-mobileMerger

Case #1

Paul Tarbox

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BackgroundAT&T had about 30 market share and !anted

to ac"uire T-mobile rom its $uro%ean o!nershi%

Both com%an use the same cellular technolog

The merger !ould ha'e gi'en ATT a (3 marketshare

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)h the !anted amerger

Create *arge +nergies

,o com%etiti'e %roblems

Merged entit could ex%and broadbandde%loment like CC !anted

)ould create .obs

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+nergAT&T !ould take o'er T-mobiles cell to!ers

!hich !ould sa'e them mone the !ouldother!ise s%end on inrastructure

The sa'ings !ould out!eigh the /3 billions%ent on ac"uisition and be %assed on to theconsumer

+u%%ort their argument !ith engineering and

economic model

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$ngineering Modelsed 3rd%art estimates o band!idth usage in

12 sam%le markets

etermined there !as a cost sa'ings b merging

the net!orks because less !ould be s%ent ontechnologies to alle'iate data congestion

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$conomic ModelBased on engineering model

Calculated that ser'ice %rices !ould all 3-and out%ut !ould be -44 higher

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5ther +nergiesClaimed sa'ings !ould come rom

10B b closing tmobile stores and lao6s

10B b consolidating inrastructure

10B in ca%ital costs7 better %rices on band!idthand deals on hard!are rom tech com%anies

Argued the at the stong %oints o tmobilesnet!ork !ould im%ro'e AT&T and 'ice 'ersa

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Com%etitionClaimed there !ould be no ad'erse unilateral or

coordinated com%etiti'e e6ects

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nilateral e6ectsMeaning- Com%etition is eliminated allo!ing the merged

entit to ha'e unilateral 8indi'idual9 market %o!er

Claimed ATT and tmobile occu%ied di6erent sectors othe market and !ere not direct com%etitors

Tmobile !as a 'alue and !as losing market share

Consumers had other o%tions

:eri;on and s%rint !ere ree to ex%and so the should beable to as !ell

+%rint came out !ith a stud indicating the merger!ould gi'e ATT unilateral market %o!er7 ATT dismissedtheir methodolog

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Coordinated $6ectsMeaning- the merger increases the %robabilit

that %ost merger the merging %arties and theircom%etitors !ill be able to coordinate theirbeha'ior in an anti-com%etiti'e !a

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Coordinated $6ectsATT said there !ould be no coordination or se'eral reasons

t e'en a threat

The merge !ould allo! ATT to increase ca%acit and lo!ercosts7 coordination !ould onl limit these ad'antages

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BuildoutATT said !ithout the merger the !ould not be

able to ex%and beond ?0 %o%ulationco'erage

Cost %rohibiti'e

Merger !ould allo! them to reach @ o the%o%ulation

Merger !ould allo! them to reach %re'iouslunreached areas7 an CC goal

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obsClaimed the buildout o inrastructure !ould

bring 10k .obs

Cited net!ork .obs stud 12 .obs or e'er 1milin'ested

Promised 2k call center .obs

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CC and 5 Analsis

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$EcienciesF +nergiesThought that ATTFtmobile arguments !ere

biased to!ards Dnding eEcienc and ignoringanti-com%etiti'e e6ects

ata and models !ere unrealistic

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$ngineering ModelCC thought the model !as contri'ed or the

case since it did not reGect normal businessmethods

:astl o'erstated ex%ansion costs andineEcientl allocated congestion resources

CC redid the engineering model !ith eEcientcongestion measures and ound that nearl all

o the eEciencies claimed b ATT disa%%eared

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$ngineering Modelound that gro!th %ro.ections !ere higher than

stated on internal documents to inGate numbers

ATT model also ignored transition costs

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$conomic modelell a%art since it !as based on engineering

model

CC reran model !ith correct numbers and

assum%tions and ound that %rices !ould behigher and "ualit lo!er

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Com%etiti'e AnalsisBased on HerDndahl-Hirschman

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nilateral $6ectsCC & 5 re.ect idea that ATT and tmobile !ere

not com%etitors

The had com%eting %lans

Ieleased ne! technolog as soon and the otherdid

Targeted each other in ad'ertising

Concluded the !ere close substitutes

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nilateral $6ects+maller com%anies !ould belimited and be

orced to %urchase band!idth and ha'e e!ero%tions to do so

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Coordinated $6ectsArgued there !as an incenti'e or tmobile to be a

ma'erick in the uture

Ma'erick- Drm !ith incenti'e to disru%t com%etition andnot coordinate because beneDts o coordinating are lo!

com%ared to com%eting and ex%anding

Tmobile had %re'iousl stated the !anted toex%and rom 11-1@ market share %re-merger

id not su%%ort ATT claims

CC cited :eri;on and ATT changing %rices and %lansat the same time arguing that coordination !ould bee'en more %ossible %ost merger

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BuildoutCC said ATT com%etitors including Tmobile

alread had %lans to co'er o'er 0 o the%o%ulation

ATT claimed that more than ?0 !ithout themerger !as cost %rohibiti'e !hich !as clearlnot the case

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obsound .ob claims to be unsu%%orted

Tmobile .obs !ould be cut

The stud the cited or .ob creation !as based onne! net!orks not existing ones

$x%ansion !as going to be minimal

Call center .obs %romised had no enorcment orguarantee

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5utcomeATT !ithdre! the merger beore the court date