Jim Cramer: Department of Justice Should Not Approve AT&T T-Mobile Deal

"The Department of Justice Should Not Approve This Deal"

Jim Cramer of Mad Money thinks the AT&T and T-mobile deal will ultimately get approved but does not think it should be approved by the Department of Justice.  He thinks it will be terrible for consumers and wonderful for shareholders.  Jim went on to interview Ralph de La Vega of AT&T who is trying to sell the benefits of the deal and Dan Hesse of Sprint who objects to the merger for market competitive reasons.

Jim Cramer interviewed Ralph de la Vega, President of AT&T Mobility while at the CTIA Wireless show in Orlando, Florida today. Ralph de la Vega says confidently that the Justice Department has historically looked at the competition on a local level. Implying the DOJ will not look at fact that Verizon and AT&T will own 80% of the market and if they looked on a National level they couldn't approve it. Ralph over confidently says there are five competitors on a local level (where?) and therefore history will repeat itself and the acquisition will be approved.  Jim asked him why the $3B breakup fee and Ralph seemed to shake it off as not a big deal. Ralph justified the acquisition by saying the companies have compatible technology and spectrum and benefits to shareholders.  Ralph made no mention of the benefits to AT&T or T-Mobile consumers.

Cramer pointed out that the deal should never be approved from an anti-trust perspective. He went on to interview Sprint's President Dan Hesse who pointed out obvious anti-competitive issues if the deal is approved and they will fight it.. Dan learned about the deal while on vacation with his family and was simultaneously in talks with T-Mobile Deutsche Telekom as well. Dan didn't think the likelihood of an AT&T & T-Mobile merger was even remotely possible before because of antitrust issues.  Dan went on to say that Sprint and T-Mobile have been pricing leaders and their success was one reason for AT&T buying T-Mobile. Dan seemed very concerned about volume pricing buys for handsets could be a concern for competition. With 130M customers, they could have huge pricing leverage over the smaller players in the market.  He went on to say that it would be hard to see a scenario where Sprint and Verizon could merge to consolidate and consolidate the remaining market to 94% between just two companies.  Dan also poses the question that if AT&T truly was pricing the acquisition based on the value of spectrum then what should Sprint be worth?  A very creative way of saying that AT&T is lying that their acquisition is about the spectrum.

Jim went on to point out that Sprint or Verizon look at buying Netflix since it is a freeloading data hog?  I would like to point out that the real reason AT&T acted quickly to buy T-Mobile is for fear of losing all of their customers defecting to Verizon.  Losing the iPhone exclusivity was a huge loss for them and they desperately needed to buy a new customer base like T-Mobile.

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