AT&T

Assignment 6: For Homework this week, after reading Chapter 10, please select one of the case studies in the chapter. Write a brief commentary (400 – 600 words) on the most critical Mergers and Acquisitions concept revealed in the case. Look at issues discussed in Chapter 10 as well as lecture notes from all weeks. State how the facts in the case study relate to the concept.

I would like to talk about AT&T which formed one of largest telecommunication conglomerate in United States. Actually there are a lot of good examples such as Cendant which engaged in real estate, rental car, travel and hospital business but AT&T was forced to conduct involuntary spin off 22 operating companies and 7 regional holdings due to judgment of Justice Department regarding antitrust law. The one of the company combine to form Verizon which is most powerful competitor in mobile phone market. This example would be most famous one. One more reason why I chose AT&T is that they are not only the loser of this judgment concerning spin off but also they failed M&A. Recently, AT&T failed to acquire T-Mobile because Obama insist that large company’s M&A has a possibility to cause confusion in this unstable economy.

From the point of the market share, AT&T has 129 million wireless customers, Verizon has 100 million wireless customers and Sprint 50 million wireless customers. In addition, each company’s Market Capitalization is that AT&T is 208B, Verizon is 136B and Sprint Nextel is 17B. T-Mobile share is much smaller than these numbers because T-Mobile couldn’t expect arrival of iPhone. They took a time to prepare Android device and fit in this competition. 

As we can see this numbers, if AT&T acquires other competitor in the same market, it would put them at risk to violate antitrust law. However, other smaller companies, except AT&T and Verizon, would be able to acquire and merger because if they acquire other company and enhance their performance and profit, this mobile phone market would expand more dramatically due to hit-up competition.

For example, last year, Japanese mobile phone company, Softbank acquired 70% Sprint Nextel stocks. As a result, the market capitalization goes up and the three companies exclude T-Mobile completely.

In conclusion, Mergers and Acquisitions are not fitting in large company’s antitrust problems. In addition, they might be forced to spin off by government. They need to consider a lot of problem about M&A and Breakup. It will cost money and labor expense for such a professional thinking. They will rely financial advisor instead of huge advisor fee. It is obviously that management of large company and decision making is complicated and difficult.