AT&T: We'll Save America if You Don't Sue Us

Once again, the U.S. Justice Department is suiting up to battle AT&T (NYSE: T  ) . Only this time, instead of seeking to break-up the monopoly we once knew as Ma Bell, the feds are seeking to block a $39 billion merger with T-Mobile.

AT&T said in a statement that it was shocked -- SHOCKED -- to learn of the DOJ's action, saying that regulators never hinted at an antitrust action in their negotiations with the company. Well, boo-freaking-hoo.

Didn't the rest of us see this coming? Not only would a combined AT&T-Mobile and Verizon control more than 80% of the mobile contract market here in the U.S., but we've all heard Sprint Nextel's (NYSE: S  ) frantic pleas for intervention and read the protests of a certain comedian-turned-senator. I'd have been shocked if the DOJ didn't file suit.

Yet here's the problem: Just as Sirius and XM together possessed a stranglehold on the satellite radio market before combining to become Sirius XM (Nasdaq: SIRI  ) , market dominance doesn't necessarily equate to an outstanding enterprise here, either. AT&T would be just another carrier if it didn't have the artificial sweetener we call the iPhone.

Interestingly, the new Ma Bell isn't making this argument. Instead, the statement points to the patriotic benefits of allowing the deal to go through, including improved wireless service, LTE broadband for 97% of the population, and "tens of thousands of jobs, at a time when our nation needs them most."

So the DOJ should back off because it's right for America? Why not just cue "The Star-Spangled Banner," too? I thought only the Hallmark Channel laid it on this thick.

Fortunately for AT&T and T-Mobile, you don't need to bleed red, white, and blue love for broadband in order to see that T-Mobile was and still is a business doomed by unlimited data plans, commodity pricing, and the end of exclusive handset contracts. On its own, T-Mobile has nowhere to go but down.

But hey, don't take my word for it. Look at the numbers for the two carriers to which it's most comparable: MetroPCS (NYSE: PCS  ) and Sprint. All three have suffered at the hands of AT&T and Verizon (NYSE: VZ  ) , mostly because of their relationships with Apple (Nasdaq: AAPL  ) . Call it the iPhone divide.

You want to increase competition? Tell Tim Cook he has to sell to every telecom operator that wants the iPhone. Because blocking a merger between a bad business (i.e., T-Mobile) and an average business (i.e., AT&T) will do exactly nothing.

Do you agree? Disagree? Please weigh in using the comments box below. And if you'd like ongoing analysis of this digital drama, be sure to add these stocks to your watchlist:

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of AT&T and Apple, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 01, 2011, at 5:25 PM, mrfield16 wrote:

    Maybe if AT&T showed ANY initiative of caring about the customer by improving their coverage, or mobile bandwidth....people would agree with them. Problem is, they don't care about the customers ability to do business, they are REactive, they charge for every bit of data possible. Companies like t-mobile are PROactive and have service plans that are much better than AT&T.....so AT&T buys them.....they have tmobile adopt the plan that is BAD for customer...not the reverse. I say, let them merge...if they adopt tmobiles pricing plans...or better yet..commit to offering the lowest pricing plans of any provider out so long as their market share is #1. Seems like a reasonable request.

  • Report this Comment On September 01, 2011, at 5:53 PM, jkirchhoff wrote:

    This merger should be allowed to go through - period. Three providers does not an oligopoly make. Why should we reward Sprint's bad business plan with protection against this merger?? AT&T is biggest because they have the best (most comprehensive coverage and sufficient service). in short, their business plan is SUPERIOR.

    If three providers in an industry is bad, why did CBS, ABC, and NBC enjoy a protected oligopoly for decades (and ABC was the Sprint of network television until it learned to compete bettter in the 1970's)? What was (is) the eventual downfall of the networks? Technologcially superior products - cable and satellite TV, namely. Now, internet provided cntent is carving its own niche.

    And why was GM, Ford, and Chrysler (Chrysler was the Sprint of that trio) allowed to enjoy the automotive oligopoly in auto manufacturing? The answer that kept them in check was constant competition - from AMC to, ultimately, overseas manufacturers of superior products!

    If AT&T/T-Mobile is a bad deal for the customer, then someone will have a niche to start a competing company (maybe satellite telephony?). The REAL capitalist solution to this. As long as AT&T doesn't engage in monopolistic and illegal practices, then why should they be convicted of it prior to the commission of the crime? If they price their plans "too high" then it is the duty of the customer to punish them by walking away and signing up with Sprint, Verizon, or a new provider.

    Man up, America! It is exactly the whining from Sprint and customers that validates the government's claims that it must interfere with every facet of our lives!!

    America has got to wake up to the fact that government intervention is NOT the answer to our dissatisfaction

  • Report this Comment On September 01, 2011, at 7:03 PM, conradsands wrote:

    Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon (the 10th leading U.S. lobbyist) and AT&T (the 12th leading U.S. lobbyist) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly -- the American consumer.

    Taking into account the whole U.S. market, a combination of AT&T and T-Mobile will raise the Herfindahl-Hirschman Index (HHI), an accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.

    If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so beware of how things could “mysteriously” turn in this case.

  • Report this Comment On September 01, 2011, at 7:04 PM, conradsands wrote:

    AT&T’s Dirty Money at Work …

    Snippets from CNN story …

    AT&T lobbyists push for T-Mobile deal

    For years, AT&T has been one of the biggest political and lobbying forces in Washington, D.C. Last year, it spent $15.3 million and had 93 lobbyists on its roster, including six former lawmakers. Germany's Deutsche Telekom spent $3 million on lobbying for T-Mobile USA in 2010, armed with 41 lobbyists and one former lawmaker.

    Many lawmakers have a personal interest in seeing AT&T do well. AT&T ranked as the sixth most popular investment among members of the House and Senate in 2009, the most recent year for which such data is available, according to the Center for Responsive Politics.

    And AT&T is considered a heavy hitter during campaign election cycles. In 2010, donors with links to the company made nearly $4 million in campaign contributions to candidates running for federal office.

  • Report this Comment On September 01, 2011, at 7:04 PM, conradsands wrote:

    Bad idea on many levels …

    Pricing: Controlling approximately 80 percent of the market would give the Twin Bells significant, unchecked leverage to increase prices for consumers for voice and data.

    Last Mile Access: Control of most of our nation’s vast wireline infrastructure and the critical “last mile” offers the duopolists the ability to raise competitors’ costs, reduce their network quality and quash competitive alternatives.

    Choice: Next-generation smartphone and tablet manufacturers would be discouraged from partnering with any company other than AT&T or Verizon because of their massive scale, limiting choice to consumers and opportunity for manufacturers.

    Innovation: Content and application developers would lack incentive to create content for companies other than the Twin Bells, diminishing innovation and harming developers as well as the capital markets that fund them.

  • Report this Comment On September 01, 2011, at 7:04 PM, conradsands wrote:

    AT&T Fleecing Customers

    Now, a lawsuit filed by an iPhone owner alleges that AT&T makes monitoring data usage more difficult by not only overbilling its customers for data transactions, but also charging for so-called "phantom" traffic -- actions the customer did not initiate.

    The lawsuit, filed by AT&T customer Patrick Hendricks in the Northern District of California and seeking class action status, accuses AT&T of breach of contract and fraud for systematically overcharging for data usage.

    "AT&T's billing system for iPhone and iPad data transactions is like a rigged gas pump that charges for a full gallon when it pumps only nine-tenths of a gallon into your car's tank," the complaint says.

  • Report this Comment On September 01, 2011, at 10:44 PM, MichaelDSimms wrote:

    This is called capitalism, the strong survive and swallow the smaller fish. T-mobile's parent company isn't going to invest to allow this company to compete and keep up technologically . So the merger really needs to go through, T-mobile will whither and die a slow death without it. Still leaves 3 mobile companies left so the choice is still there. However, Sprint won't last that much longer either at the rate they are going. Rather than Sprint complaining about it I think they would encourage it, seems a lot of T-Mobile customers would defect to them (some at least).

  • Report this Comment On September 02, 2011, at 12:35 AM, iParadigm2watch wrote:

    I await Apple assimilating Sprint.

    Take that Google...justice dept. AT$T-Verizon!

    haha....

  • Report this Comment On September 02, 2011, at 3:25 AM, jesterisdead wrote:

    This is just the government's excuse to extract more tax money from AT&T before T-Mobile fails and AT&T buys them out anyway.

  • Report this Comment On September 02, 2011, at 11:29 AM, michaelurias1 wrote:

    If Apple was to give Iphone to Metro PCS I would buy eight and go with Metro... the total would be about what I pay with AT&T.

    Only AT&T and Apple benefit here.

  • Report this Comment On September 02, 2011, at 11:30 AM, michaelurias1 wrote:

    ... for 4 phones and only two of those are IPHONE.

  • Report this Comment On September 02, 2011, at 2:12 PM, maryannols wrote:

    I am a 32 year employee of AT&T, nee SBC, nee Pacific Bell, nee Pacific Telephone. AT&T would look a lot more interested in caring about America if they weren't constantly emilinating jobs all over the country. Don't be fooled by flag waving. They are only interested in the $$$. If they really want to "save America" they should take some of their billions and hire people, even they do nothing more than help us with our filing or pull weeds growing up through the parking lot asphalt.

  • Report this Comment On September 02, 2011, at 2:58 PM, Aryabod wrote:

    Capitalism is the way to go! However we should understand Monopoly is a defect of Capitalism and without any restraints Monopolies can eventually alter the course of our democracy. Our nation has survived revolutions and wars that have made us the greatest nation on earth. In less than two hundred years be have become the greatest nation in history and very seldom flexed our muscle by annexing pillaging other nations. In fact the new world order only came into being out of America's benovolence. China, S. Korea, Japan, Germany and many other nations would not be anywhere close to where they are today without America's open arms and Free Trade. Notwithstanding the aforementioned, it is our checks and balances through democratic legislation that has kept the likes of Standard Oil, Ma Bell (old ATT) and MSFT from owning the nation.

    When we know that Spectrum resources are limited how in God's great name can we be silly enough to contemplate the idea of allowing any company to own more than its fare share. Once the gets parked in the coffers of AT&T and VZ it will be virtually impossible for anyone to compete in this wireless sector. If you are in favor of Monopolies then all you need to do is look at the disastrous effects they eventually cause. If you are in favor of duopolies you should also look at our political system, which is becoming a farce where the citizen becomes second only to the political interests of those elected.

    The more choices people have the greater innovation and eventual benefits to the citizen. Four national telcos is much more favorable to the consumer than two. If T Mobile is allowed to go then you can rest assured Sprint will be next. VZ will have a much easier case to eliminate Sprint once ATT has made a precedent.

  • Report this Comment On September 02, 2011, at 6:07 PM, FoolyOut wrote:

    Remember T-Mobile bears: The I-Phone 5 supposedly is coming out in "Unlocked" and several other versions as well as the regular-old AT&T-chained version of today, so T-Mobile is probably going to get a FLOCK of newbies when that happens....that's why AT&T WANTS to buy them cause their corner on the market is about to be turned. So, let's not count them out juuuuust yet :-)

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