There are winners and losers in the Justice Department’s decision to block AT&T’s $39 billion acquisition of T-Mobile. From an investment perspective, it could make the entire wireless industry – at least its major incumbents – look less attractive as high competitive heat will continue to cook high margins out of the business. And that’s exactly what the DoJ is after, lower prices to benefit consumers, not stockholders.
The folks at number three Sprint are thrilled that number four operator T-Mobile will remain independent. 4G spectrum owner and operator Clearwire could also stand to benefit as the others scramble for more wireless capacity to accommodate booming traffic generated by smartphones and tablets.
With the competitive landscape largely intact, price pressure will continue to dominate the mobile network operator (MNO) agenda as well the ongoing search for revenues from value-added services. That’s been the driver for MNO interest in payments. But the path to that value-added destination for communications providers has always been a rocky one. Internet service providers have only been able to differentiate on tiered bandwidth plans. Consumer-facing services come from the likes of Netflix, Google, Apple, and others. Mobile operators find themselves in a similar dilemma. Moving into adjacent spaces, like payments, will require a big investment into a non-core activity. The rumored $100 million investment into Isis will only be a good down payment if the MNOs are serious about entering the payments and mobile commerce world.
Four nationwide providers — Verizon, AT&T, T-Mobile and Sprint — account for more than 90 percent of mobile wireless connections.
“Things will move fast at first as the parties fight over whether a federal judge should initially block the move. If it is blocked we’ll either see the deal withdrawn, or restructed to satisfy the feds, or we’ll see a long, drawn-out court case,” CBS Radio News legal analyst Andrew Cohen said.
AT&T would be forced to pay a $3.8 billion break-up fee to T-Mobile if the deal does not get done,notes CNET’s Marguerite Reardon.
