A big story today is the US government’s effort to block the proposed $39 billion acquisition of T-Mobile USA by AT&T. AT&T wants T-Mobile’s spectrum and network and the US thinks it will harm competition in the wireless market.
According to the New York Times the government’s lawsuit boils down to the argument that less competition equals less innovation and ultimately higher prices for consumers:
“AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the complaint said. “Thus, unless this acquisition is enjoined, customers of mobile wireless telecommunications services likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest than would exist absent the merger.”
AT&T is likely to fight the litigation and may wind up settling with the US. However if it fails to acquire T-Mobile the deal calls for almost $7 billion worth of concession payments and spectrum access to the AT&T network.
But how does this relate to Google?
I was somewhat surprised to see the US file to block the deal. I’m sure AT&T was also surprised (so were investors who are pushing AT&T stock down this morning). Even though it would pretty obviously harm competition, I believed that AT&T would be able to negotiate with or twist the arms of regulators into approving the deal. But that didn’t happen.
While the ultimate outcome of the litigation is uncertain this relatively bold move suggests that the US Justice Department is being tougher than in the past. (Some would argue the DOJ is simply doing its job here.) Either way it’s probably not great news for Google, as the antitrust investigation against the company begins in earnest. However I don’t think this darkens the outlook for Google’s acquisition of Motorola Mobility, because the handset market is quite competitive.
Perhaps there’s no connection between the move to block AT&T-Mobile and the antitrust investigation against Google. But I suspect the tougher stand against AT&T, combined with the recent $500 million Google-Canadian pharmacy settlement, don’t augur well for big G.