Opinion: AT&T's Merger Win To Significantly Affect Other Wireless Tie-Ups

On Tuesday, Judge Richard Leon ruled on the AT&T and Time Warner merger case, where the Justice Department was looking to block the merger. Judge Leon ruled that AT&T and Time Warner could merge, and without any conditions. The fact that there were no concessions requires was a bit surprising, as well; many were expecting that the combined company would need to spin off and sell some media properties like CNN and HBO, but that's not the case. This case was being watched closely by a number of other wireless carriers and media companies to see whether they would be able to merge with others. The other big mergers that may be happening next is 21st Century Fox being bought by either Comcast or Disney, but there's no agreement there yet. Then there is the Sprint and T-Mobile merger, that was announced about a month ago. This case actually is going to have a rather big impact on the Sprint and T-Mobile merger here.

While AT&T and Time Warner's merger is what they call a "vertical" tie-up as AT&T isn't actually buying a competitor, Sprint and T-Mobile's proposed consolidation is a horizontal one, as these are both direct competitors combining into a single company. So many may believe that the AT&T ruling may have nothing to do with Sprint and T-Mobile's potential merger, it does lay the groundwork for what could be a long road for the two companies in the coming year. With the Justice Department losing this case, in what Judge Leon said that the Justice Department did not have a good argument against AT&T buying Time Warner. Many were surprised by the Judge's ruling here, but it's a good thing for both T-Mobile and Sprint.

For years, T-Mobile and Sprint have been talking and looking to merge. The two finally came to a deal about a month ago, that would cost around $26.5 billion and leave T-Mobile's current CEO in charge of the combined company. These two companies are still going to have a tough time selling this merger to regulators, but the big deal here is that T-Mobile will be able to better compete with the "Duopoly" of the wireless industry, AT&T and Verizon, which are both more than twice the size of T-Mobile and Sprint right now. The reason behind that is the fact that regulators want more competition and not less. And this merger would take the industry from having four wireless carriers to three. While Legere and Claure argued that there are around eight or nine players now, that's not really true - as the others are MVNOs from Comcast, Charter and other cable companies. But with the Justice Department having lost this case for AT&T and Time Warner's merger, it does pave the way for Sprint and T-Mobile to go ahead with their own merger.

The argument that Sprint and T-Mobile will be giving for its merger is somewhat similar to what AT&T argued in purchasing Time Warner. AT&T argued that it needs Time Warner so that it can compete with other media companies like Netflix, Facebook and YouTube. Time Warner does own a good number of media properties, and with it being part of AT&T in the coming weeks, the carrier will be able to provide more original content as well. Similar to what Netflix, Amazon and Hulu are all doing these days. For Sprint and T-Mobile, the argument is pretty similar. The two are going to argue that they need to combine to compete with AT&T and Verizon. Considering they are currently half the size of AT&T and Verizon, combined they would be about 15 million subscribers behind AT&T and around 25 million behind Verizon. That puts them much closer to being competitive with those two, not to mention the combined spectrum portfolio of Sprint and T-Mobile would put them in prime position for 5G.

This judgement from Judge Leon is going to lead the way for a flurry of other merger and acquisition activity. In recent weeks, Disney has been in talks to acquire 21st Century Fox (essentially the movie division of Fox), and has even submitted a bid. Not to be outdone, however, Comcast has also sent over a bid to 21st Century Fox, which is higher than Disney and now with the AT&T merger going ahead, we will likely see a price war between these two media giants. Though 21st Century Fox is leaning towards Comcast, not only for the higher bid, but it believes Comcast would be a better fit. Not to mention there is also the CBS and Viacom merger that is pending.

Remember that AT&T isn't the first carrier to buy a media company, Comcast actually bought NBC Universal in 2009, which gave Comcast a good amount of media under its umbrella. Though that merger didn't go to court, the FCC had been urged to offer NBC Universal content to its competitors at a fair rate. Which it wasn't enforced, but Comcast is doing. Much like AT&T and Time Warner, Comcast would lose a big chunk of revenue if it decided to raise rates for licensing content, as many competitors would just not offer that content. That was another point argued by Time Warner during the trial.

T-Mobile and Sprint are expecting its merger to close in the first half of 2019, which is around a year after the deal was announced. That doesn't give a whole lot of time for regulators to scrutinize the deal, and possibly take it to trial. For example, the AT&T and Time Warner merger was announced 20 months ago, and it is expected to now close next week, with this trial being over now. It's unlikely that T-Mobile and Sprint's deal will be done by the first half of 2019, especially if the Justice Department seeks to block it - like many expect. But, with the way the AT&T and Time Warner trial went, the Justice Department may not seek to block this one. This ruling was a big step and shows what to expect under the Trump Administration - which was already apparent to be less strict on mergers and acquisitions, whether horizontal or vertical.

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Alexander Maxham

Section Editor
Alex has written for Androidheadlines since 2012 as Editor of the site and traveled the World to many of the biggest Smartphone and Technology events. Alex has a background in Technology and IT and Deep Passion for Everything Android and Google. His specialties lay in Smartphones of all budgets, Accessories, Home Automation and more. Contact him at [email protected]
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