Several states are suing to block the merger between these two telecom giants, Reuters reports. In a healthy free-market economy these two companies compete for mobile customers by proving the latest products, and good service. Since Mobile device manufacturers themselves already have a ton of market power, carriers like T-Mobile and Sprint have lower margins on the devices themselves, and instead rely on the sale of accessories and data plans, as well as service.
I don’t know if you have had any experience with either of these companies, but if you have, I ask: do you get the impression that they are competing for your business by offering better service than their competitor at lower prices? If you answered yes, you should know you live in a much different world than the rest of us. In fact, the article mentions:
“When T-Mobile majority shareholder Deutsche Telekom first contemplated the deal in 2010, it “expressly and unambiguously admitted that it had potential to reduce price competition,” Pomerantz said.”
Well obviously. For anyone paying attention to the corporate conglomeration of common goods and services knows that pricing and service continually suffer the larger the market share of a company becomes. A corollary to this is cable, Comcast vs Dish. How is that going, with everyone cutting the cord? Comcast, the last I checked, was voted the worst company in the U.S., and for a long time if you Google image-searched Comcast, the first image to appear was a swastika. They are not popular. They didn’t have to be, they just had to be the only choice. Thank god for Netflix.
So why are T-Mobile and Sprint trying to merge? Well, as the article mentions:
“Glenn Pomerantz, a lawyer for the states, said that the case would impact at least 130 million customers, since a merger would leave the United States with three major phone carriers instead of four.”
Their stated reason for the merger is the exact opposite of what would happen in practice. They want this merger so they don’t have to compete with Verizon and AT&T. The further reduction of choice is bad for everyone, except for a select group of shareholders. There would be three companies which own all the market share and set prices on data, and service would further deteriorate. Is this what we want?