Good News Not So Good News For Customers As AT&T Bids To Buy T-mobile

Posted on 22 May 2011

AT&T has opted to make an offer to buy T-mobile. This deal must be approved by the Department of Justice and FCC, which may prove to be a challenge. The merger could help consumers in under-served areas. Most consumers, however, would end up paying more for the same service. Source for this article – Good news bad news for consumers as AT&T bids to buy T-mobile by MoneyBlogNewz.

Merging T-mobile and AT&T

T-Mobile is currently the fourth largest wireless provider in the United States. Owned by Deutsche Telekom AG, T-mobile was entertaining offers from both AT&T and Sprint-Nextel. About $39 billion in cash and stock is being offered by AT&T. This is so a merger and buy-out of T-mobile can happen. There would be 130 million consumers for the two businesses put together, which is more than Verizon Wireless has. The merger cannot just take place. First the Federal Communications Commission and Department of Justice has to approve it. The new business can’t be a monopoly, which the DOJ would certify. Communication laws cannot be broken with the AT&T/ T-Mobile merger either, which the Federal Communications Commission would look at. This is probably not a fast approval process. It could take over a year.

Consumers doing better with an AT&T merger

The AT&T/T-Mobile merger may be good. Customers could benefit. Regulatory agencies will likely require the new, merged business provide extended service to underserved areas. There would be less of a strain. There are only so many wireless networks to go around. The merger would also expand the availability of high-speed wireless broadband. In short, the new company would be able to provide expanded service to wireless customers.

Why it can be bad for the AT&T merger

The proposed merger is expected to increase income by $3 billion per year, most of which will come from the short term installment loans of consumers. Combined, the new AT&T and Verizon would serve 75 percent of wireless consumers in the U.S.. This duopoly would reduce the downward pressure on prices, increasing the price paid for wireless service. The combined business would likely follow AT&T’s lead in limiting wireless data and charging higher costs for overages.

Wireless service costing more and more

The AT&T / T-Mobile merger are not the only thing to consider. Wireless service costs just keep going up. Taxes, just like the federal government taxes, are charged on mobile phone services by cities, states and municipalities. The tax on cellular phone service is about where the cigarette and alcohol tax is for most. In the nation, there is a 16 percent tax. This is the average. More income is paid, percentage wise, by a lower income individual than others for the very same service as the tax is regressive. A three to five percent tax is on landline telephone service.

Information from

Bloomberg

bloomberg.com/news/2011-03-20/at-t-agrees-to-buy-deutsche-telekom-s-t-mobile-usa-unit-for-39-billion.html

KSE Focus

ksefocus.com/wordpress-content/uploads/2011/02/2010-Tax-Study-Final-Tax-Notes-PDF.pdf

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