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7/26/2019 AT&T T-mobile merger
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AT&T T-mobileMerger
Case #1
Paul Tarbox
7/26/2019 AT&T T-mobile merger
2/25
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