You have seen the ad. The T-Mobile woman is young, and wearing a red-and-white striped dress that recalls summer and the American flag. The iPhone man is also young, but he is swathed in dark clothes, and he has a bald middle-aged man riding on his back.
“Who’s your friend?” the woman asks.
“It’s the old AT&T network,” the young man replies.
“That’ll slow you down,” she says.
The consumer choice that ad represents will go away if AT&T’s purchase of T-Mobile is approved by the Federal Communications Commission. We think the deal should not be approved, for several reasons.
One is customer service. As the ad implies, AT&T is not known for its good service. Paul Reynolds of Consumers Union reports that their surveys “found AT&T to be the clear worst wireless carrier in the country.” AT&T is rolling out new technology, so its service will probably improve, but still this is a case of the acquiring company being the one with the most problems.
Another reason is price. Wall Street sees the gobbling up of T-Mobile “as the elimination of a pesky low-priced rival,” says Eric Savitz of Forbes. Customers need to have companies like that.
Both of these reasons are part of a larger concern about market power. This transaction combines the No. 2 and No. 4 in the market, creating a new No. 1. That leaves Sprint Nextel at a weak No. 3.
The obvious next step is the combination of Verizon and Sprint. At that point, the mobile-phone providers becomes a Pepsi-and-Coke market with two big choices.
For those reasons, our thought on this merger is “no.”
The Seattle Times (March 22)