As I opined back earlier this year in a posting I considered the then pending AT&T - T-Mobile merger to be a good event for all involved. So since the US Justice Dept. has decided no to allow the merger let's take a look at the players and who wins and who losses.
One opening thought is that all business in the US suffers from US Justice, read Obama, saying no to allowing this merger. I expect investors and the both parties involved in the current attempt to merge Duke and Progress Energy will now consider the possibility that merger which is already having trouble with the Feds going down too. Contrary to many think companies do not merge to get bigger so they can become a monopoly and jack up prices to consumers. The cost to merge is expensive and frankly most mergers fail to achieve the desired results and hurt investors more than consumers. Most merge because both sides of the business see advantages. Note this merger was not a forced issue or takeover, it was agreed to by both sides from the start. One of the biggest mergers of all time caused all kinds of worry from consumer advocates only to lose billions for investors, that one being Time Warner-AOL. Going forward you can expect most corporations will do two things differently. One, they will likely put a hold on mergers as long a Obama is in office to avoid the costs of attempting a merger that will likely get turned down. Two, and this one is where consumer advocates and liberals lose is that corporations will do more political contributions to influence such decisions. Such is the way of Washington DC. Maybe that is what the politicians wanted all along.
The losers include AT&T who now must find other ways to gain spectrum badly needed for expansion of networks and upgrading of faster service. Since the Federal Government seems to be unwilling to sell more right now expect AT&T to look for spectrum in places like Dish network and other satellite TV providers. In that same vein consumer lose because AT&T, and Verizon, will not be able to upgrade networks going forward so advances in mobile services will slow to a standstill. Prices might go up as well since providers will now own almost all of the available spectrum and it will become more valuable. Strange that the US Justice Dept. did not see this angle or maybe they did not care or maybe they are so eat up with anti-business bias they missed the point. T-Mobile losses too since they have an asset in the US that has little value going forward other than the network they could have sold. Like Sprint, T-Mobile will likely either find another way to increase quality and size or slowly die. One point that seems lost on many is that utilities, like telecom or electric services, work must better for investors and owners when size can be used to lower costs and increase services. Utilities, properly regulated, have proven their approach for several centuries now. Private unions lose here again, as with the Keystone Pipeline decision, since T-Mobile is not unionized and the telecom unions here envisioned several hundred thousand more union paying members from the merger. Beats me how these private unions keep supporting Obama when he keeps kicking them in the teeth.
I also believe Verizon gets hurt here too since as I noted utilities do business better when they can concentrate on doing more business and providing more services instead of dealing with competition from other carriers. Having basically two big operators would have allowed both AT&T and Verizon to use their vast cash flows on more innovation and faster services that they could charge more for, now that will not be the case.
The winners here are rural telecoms such as CTL and WIN who no longer face the looming threat from AT&T or Verizon in their service areas. The rurals now can continue to expand their less quality wire line internet and television services without the worry of added competition. Of course rural consumers lose here too since their options and selection of media services will be much less. But investors in these rural telecom's win since the heavy debt loads and dividends from these legacy carriers will continue for years to come. Anyone who hold spectrum wins here since the big telecom's will have to find it somewhere and their prices just went up. Less winners than losers and that was the point of the merger all along.
Finally another loser overlooked is the US Government who loses tax money from the $4 billion dollar write off going on AT&T's book next quarter against tax liability. So yes you the taxpayer will pay for another one third of this costs.
I own T, CTL, and WIN as either an option or long.
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