Obama Administration moves to block AT&T merger

Here is the news:

The U.S. government sued to block AT&T Inc. (T)’s proposed $39 billion acquisition of T-Mobile USA Inc., saying the deal would “substantially lessen competition” in the wireless market. AT&T shares fell as much as 5 percent.
In the complaint filed today in federal court in Washington, the U.S. is seeking a declaration that Dallas-based AT&T’s takeover of T-Mobile, a unit of Deutsche Telekom AG (DTE), would violate U.S. antitrust law. The U.S. also asked for a court order blocking any arrangement implementing the deal. . . .

I don't know if the Obama administration actually follows the stock market, but T-Mobile has been losing customers and its profits have been falling.

T-Mobile, one of the largest mobile networks in the United States, lost 50,000 customers in this second quarter alone.

This quarter, though not as dire as the previous reports from Q1 2011 and Q2 2010, where it lost 99,000 and 93,000 respectively, still presents a negative picture for the U.S. wireless giant.

Overall, the total revenues were down slightly compared to the previous quarter; with just over $5 billion generated this quarter, down from $5.4 billion from the same quarter last year.

While contract customers were dropping in their thousands, T-Mobile partly made it up in sales of pre-paid sales, as the pre-paid customer segment is rising in the company’s portfolio.

Still with over 33.6 million subscribers, though losing 281,000 contract users, it had gained 231,000 pre-paid customers this quarter.

T-Mobile has lost nearly 150,000 customers this year.

But as contract customers are a fixed and regular source of income, it is worth mentioning that contract customers are far more valuable to T-Mobile and other mobile networks than unreliable, revenue dripping pay-and-go customers. . . .

On profits:

During the first quarter of 2011, T-Mobile saw its revenue hit $4.63 billion, putting it in line with the first quarter of 2010. However, the company's profit fell over $200 million year over year from $362 million last year to $135 million in the first quarter of 2011. . . .

Someone at Info World also thinks that T-Mobile is a dying company:

But ultimately, T-Mobile is a dying company. Despite its slightly lower prices and a reasonable set of cellphones and Android smartphones, its contract-based customers are fleeing to Verizon Wireless, AT&T, and to a lesser extent Sprint, and its pay-as-you-go customers are looking more and more at the nation's fifth largest carrier, Metro PCS. . . .
The iPhone is not the only reason T-Mobile is struggling, but I'd argue it's the biggest reason that affects customer behavior. T-Mobile's other problems are invisible to customers, but just as important to its long-term survival (or lack thereof). . . .
Because parent company Deutsche Telekom decided not to invest in the company's U.S. spectrum licenses a decade ago, T-Mobile has very little spectum that can be used for the emerging LTE 4G networks. Over time, that decision will relegate T-Mobile to second-tier network status -- unlike its four major competitors. . . .
It's hard to imagine how T-Mobile can succeed in its current state. . . . .

Even left wing think tanks think that jobs would have been created.

ITIF finds that investments in America's digital infrastructure will spur significant job creation in the short run. Specifically, ITIF estimates that spurring an additional investment of $30 billion in America's IT network infrastructure in 2009 will create approximately 949,000 U.S. jobs. . . .

UPDATE 2: If AT&T's merger was going to hurt consumers by raising prices, should Sprint be happy or upset? They should be happy. If the merger was going to lower prices and provide better service, should Sprint be happy with this increased competition? The fact that Sprint is filing an antitrust suit against AT&T tells us everything that we need to know about whether this merger will increase efficiency.

UPDATE: Not clear that this is the way to run things.

“The news caught everybody by surprise,” said Steve Largent, president and CEO of CTIA-The Wireles Association, which hadn’t taken a position on the transaction. “AT&T was in the middle of explaining and detailing the merger that was being proposed when the Justice Department filed,” Largent said. CTIA includes AT&T, T-Mobile and Sprint Nextel Corp. (S) among its members. . . .