AT&T Bid for T-Mobile Raises Caution From Consumer Advocates

AT&T Bid for T-Mobile Raises Caution From Consumer Advocates

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Cell phone providers are among the largest utility companies in the world, multibillion dollar operations catering to billions of consumers around the globe. In the United States, the industry is dominated by Verizon Wireless, AT&T, Sprint and T-Mobile, with several smaller, but notable providers including Boost Mobile, U.S. Cellular and TracFone.

T-Mobile USA

Over the weekend, Deutsche Telekom announced that it was selling its T-Mobile USA unit, to AT&T for $39 billion. T-Mobile has been part of the German company since 2001, when it acquired Voicestream, a Seattle-based mobile communications company. However, since 2007, when the Apple iPhone first went on sale, the New York Times states that the company first began to lose many of its best customers to AT&T, and now to Verizon Wireless, the latter who gained access to the market in February 2011.

Merging the second and fourth largest cell phone providers will create a new company that will be larger than Verizon Wireless. That isn’t sitting well with some consumer advocates who are calling upon federal regulators to scrutinize the deal.

Consumer Reports

Said Parul P. Desai, policy counsel for Consumers Union, “AT&T is already a giant in the wireless marketplace, where customers routinely complain about hidden charges and other anti-consumer practices.  From a consumer’s perspective, it’s difficult to come up with any justification or benefits from letting AT&T swallow up one of its few major competitors.  We plan to work very closely with regulators and lawmakers to scrutinize this deal and what it would mean to people’s pocketbooks.”

Consumer advocates have reason to be concerned when it comes to blockbuster mergers and acquisitions involving cell phone companies. In 2004, AT&T acquired Cingular for $41 billion, in a move scrutinized by the Department of Justice. As reported by USA Today on June 15, 2005, some of AT&T Wireless’ customers were unceremoniously dumped by the cell phone giant to comply with federal regulator demands.

Eliminated Service

Those customers, 6,000 in all, had their Cingular service eliminated as the Lamar, Mo., market was sold to U.S. Cellular. For customers who wanted to stay with Cingular, now AT&T, they were told they had to pay a $175 disconnection fee to move on. Complaints to regulatory officials were ignored, leaving thousands of customers stuck with a provider they did not want or forced to pony up the cash to make the switch. All told, some 300,000 customers were let go to satisfy regulators.

Consumers have no choice if their current carrier is acquired by another company and they don’t want to go with the new provider. Like the Lamar situation, cell phone customers can pay to break their contracts, but the cost is often equal to three or four months of service charges. In addition, under new contractual arrangements, affected consumers may have to buy new phones, costing $50 or more.

Other blockbuster mergers of note in recent years include Verizon Wireless’ acquisition of MCI (2006) and Sprint’s purchase of Nextel (2005). Both deals were difficult for the acquiring companies to swallow, but affected consumers in ways similar to the Cingular debacle.

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