Client Losses of T Mobile Likely toTriple on AT&T Deal

October 07 00:00 2011

New York, October 7 ( – Blocking AT&T’s (NYSE: T) proposed $39 billion bid for takeover of T-Mobile, a unit of Deutsche Telekom AG, is the subject of a lawsuit filed by the Justice Department because it is alleged that such a deal would “remove a significant competitive force from the market.” However, this attempt by the Justice Department is impeding T-Mobile’s ability to cut prices and creating concerns among consumers.

As such, T-Mobile is likely to lose three times the number of contract subscribers this year as in 2010. Its number of customers on monthly contracts might decline by about 1.2 million this year as compared to a decline of 390,000 in 2010, according the estimates of some analysts. As a result, the company’s total number of customers would reduce to 33.5 million and its contract subscribers would fall to 25.2 million by the end of the year.

Craig Moffett, an analyst with Sanford C. Bernstein & Co. said “T-Mobile’s market share losses are being exacerbated because it’s refraining from the aggressive price cuts it has used in the past.” He added that although in the past, the company could attract customers with price cuts, “They may now aid the Justice Department in making its case T-Mobile should remain independent because it helps suppress prices for consumers.”

Moffett added that “Cutting prices at this point would be very difficult because the DOJ has said their strategic importance stems from their role as a price cutter.”