US DoJ approves merger of US mobile carriers T-Mobile and MetroPCS

Published On 16/03/2013 | By William Osborn | Mergers

On 12 March 2013, the DoJ announced that, after a thorough review, it has closed its investigation into the proposed merger of T-Mobile and MetroPCS. The DoJ determined that the merger of the T-Mobile and MetroPCS would not substantially lessen competition in local or national markets for mobile telecommunications services and in fact may have a pro-competitive effect.

T-Mobile and MetroPCS are the fourth and fifth largest mobile carriers in the US respectively, based on subscriber numbers.  T-Mobile is a wholly owned subsidiary of Deutsche Telekom AG and one of four nationwide providers of mobile services.  By contrast, MetroPCS only provides mobile services in certain regions of the US and has less than a third of the number of customers that T-Mobile has.

The DoJ’s investigation found that the MetroPCS service is not a particularly unique or a competitively significant offering in the local markets in which it operates.  Because of the spectrum it uses, MetroPCS’s signal is less able to cover rural areas and penetrate buildings.  The local markets in which MetroPCS operates are also served by the four national mobile carriers.

The DoJ’s view is that the most significant competition in the US mobile wireless industry takes place at the national level.  Unlike Australia, where mobile providers compete on a national basis (albeit that some have limited coverage in regional areas), the US has a number of small mobile providers whose networks are limited to particular states or other geographic regions.  According to the DOJ, these providers typically do not market to customers based outside their geographic areas, due to the high ‘roaming’ charges they must pay to other mobile providers in order to provide a ‘national’ service to their customers.  They face challenges in competing with nationwide carriers because of their lack of nationwide spectrum, networks and scale.  Because of these limitations, MetroPCS exerts little influence over plan pricing, device offering and network technology, and therefore its acquisition by T-Mobile was not likely to substantially lessen competition.

In 2011, the DOJ moved to block the proposed acquisition of T-Mobile by AT&T, the second largest mobile wireless provider in the US.  The DOJ’s view was that T-Mobile was a vigorous competitor who challenged AT&T and the other major players, Verizon and Sprint, both on prices and service offerings.  Accordingly, its acquisition by AT&T would have reduced incentives for the remaining nationwide providers to offer better prices and service.

By contrast, the DOJ found that the T-Mobile/MetroPCS merger may in fact have the pro-competitive effect of allowing T-Mobile to improve its scale and spectrum position through use of the compatible network provided by MetroPCS, enabling it to better compete with the three largest national players.

By Natasha Cox and William Osborn

Photo credit:  Mattchamplin  / Flickr / CC-BY


About The Author

is a solicitor in the Melbourne office at King & Wood Mallesons.

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