Thirty years of lax antitrust enforcement and favorable tax treatment and big compensation for executives involved in mergers have left us with many highly concentrated industries. The results: Fewer jobs, less competition, too much political clout for the big quasi-monopolies and cartels, and arguably less innovation. When AT&T laid down $39 billion to acquire Bellevue-based T-Mobile, it seemed as if the same old game would continue. AT&T would control 53 percent of the market. Then, shockingly for an administration so controlled by business (for all the “socialism” rants on the right), the Obama Justice Department sued to stop the deal.
Now, according to the Wall Street Journal, AT&T’s efforts to sell off enough assert to save the acquisition are failing and it’s close to giving up. This is a good thing, even if T-Mobile’s owner, Deutsche Telekom, wants out of the American cellular market. Let another potential partner or owner emerge.
For most of the year or even longer, executives at both companies have been more focused on doing the deal than serving customers. This has been happening in American business for decades. It’s easier to buy growth through a merger than to grow organically. Yet study after study shows that most big mergers fail to deliver their promised benefits. Meanwhile, the mania to do deals to please Wall Street distorts the economy in myriad ways.
AT&T isn’t exactly the old Ma Bell; a bulked-up baby bell took the name. But I recall the old AT&T’s hostile takeover of NCR in 1990. Ma Bell was desperate to get into computers, so it finally mounted an intense battle to acquire the flagship corporate headquarters of Dayton, Ohio. NCR resisted, but it was a hopeless fight without proper regulatory barriers or tax disincentives. The dealmakers got richer. The merger failed. NCR was spun off, but never really recovered its old mojo. The corporate headquarters eventually moved to suburban Atlanta, devastating Dayton.
It would be too much to hope that AT&T’s failure with T-Mobile would be the beginning of a new era of robust antitrust enforcement. That building productive businesses would be rewarded more than doing anti-competitive, job-killing deals. But at least this bad deal is likely history.
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Today’s Econ Haiku:
Never speak badly
Of the dead, mother told us
So: Kim is dead. Good.
(with apologies to Bette Davis)