The Merger of Two Cellular Carriers There is no doubt that cell phone services in the U.S. are big business since it allows consumers to go anywhere, do anything and communicate at any time. With so much demand and so little competition there is always going to be that urge to for a bigger company to merge with a smaller one to gain more market shares and more consumers. If it were not for Herfindahl Hirschman Index (HHI) this market would probably have a monopoly on its hands. This was evident when AT&T tried to merge with T-Mobile which will be evaluated here along with how the HHI works and what would have happened if AT&T tried to merge with a smaller carrier such as TracFone. Following this examination, a brief look at the anti-trust guidelines and the pros and cons of this possible merger will be discussed. Effects of a Merger …show more content…
What is the HHI? The purpose of the HHI is to measure market concentration regarding competition both prior to a merger or acquisition and after (Samuelson & Marks, 2015). The HII is based on a scale from 0 to 10,000, with 10,000 being a monopoly and 0 indicating nearly perfect competition. The Department of Justice has identified that an HHI which falls under 1,500 is considered a competitive marketplace, go above 1,500 to 2,500 the market is considered moderately concentrated, and anything above 2,500 is highly concentrated (Investopedia, 2018). When a merger occurs and the HHI is raised by 200 than antitrust concerns can come into play (Investopedia, 2018). So where does the cellular market stand before and after a merger of AT&T and
As the leadership body of HIH, the board of directors should have come up with plans to improve its research and investigating capability with respect to targeting possible acquisitions. The board of directors could have considered even forming a separate committee dedicated for this purpose. Unfortunately, the core group of HIH gave weight to persuasion from its members, particularly Adler, to approve the acquisition.
Robert Zimmerman, the senior vice president of business development, for American Cable Communications (ACC) was in the process of looking for a potential acquisition target for ACC. In December 2007, Zimmerman remember a presentation that was made recently by Rubinstein & Ross (R&R). R&R was a boutique investment bank that was well known for doing deals in the media and telecommunications area. During this presentation it was suggested that ACC buy out AirThread Connections (AirThread) which is a large regional cellular provider. The current industry of these companies were moving more toward bundled service offerings and by adding AirThread it would help ACC cover an area of service it does not currently offer. In order to determine if the acquisition should be done an analysis needs to be done.
Of particular importance is the deregulation of the telecommunications industry as mentioned in the act (“Implementation of the Telecommunications Act,” NTLA). This reflects a new thinking that service providers should not be limited by artificial and now antique regulatory categories but should be permitted to compete with each other in a robust marketplace that contains many diverse participants. Moreover the Act is evidence of governmental commitment to make sure that all citizens have access to advanced communication services at affordable prices through its “universal service” provisions even as competitive markets for the telecommunications industry expand. Prior to passage of this new Act, U.S. federal and state laws and a judicially established consent decree allowed some competition for certain services, most notably among long distance carriers. Universal service for basic telephony was a national objective, but one developed and shaped through federal and state regulations and case law (“Telecommunications Act of 1996,” Technology Law). The goal of universal service was referred to only in general terms in the Communications Act of 1934, the nation's basic telecommunications statute. The Telecommunications Act of 1996 among other things: (i) opens up competition by local telephone companies, long distance providers, and cable companies ...
Perhaps no other company has benefited more from this deregulation than the company which is the focus of this essay – Clear Channel Communications, Inc (CC). The Telecommunications Act and the actions of the FCC paved the way for the rise of this radio industry behemoth. In 1995, the company owned 43 radio stations nationwide. By 2002, it owned 1,239, making it the largest radio company in th...
MCI Case Analysis INTRODUCTION MCI is at a critical point in their company history. After going public in 1972, they experienced several years of operating losses. Then in 1974 the FCC ordered MCI's largest competitor AT&T to supply interconnection to MCI and the rest of the long distance market. With a more even playing field, the opportunities to increase market share and revenue were significant. In order to maximize this opportunity, MCI requires capital.
Television, the phone, and the internet. These inventions have uniquely shaped the 20th century and have led to the 21st century being known as the age of information. These services are the primary ways we communicate, express ourselves, and reach out in our ever increasing global world. In the United States, these services are provided by a number of different firms, chief among them is Comcast, being the largest provider of Cable and internet in America, and a large telephone provider. Next to it stands Time Warner Cable, the second largest provider of cable in the United States. The decision for Comcast to buy Time Warner Cable for forty-five billion dollars in 2014 has led to many criticizing the merger, calling it a monopoly. Others have called the whole cable system an oligopoly. For it to be a monopoly or an oligopoly, it would have to fit their respective categories. The merger between Comcast and Time Warner Cable would not create a true monopoly, but would give it significant market power because it has monopoly resources and can be considered a natural monopoly. It will also further its power in a market dominated by oligopolies. People argue that it is not a danger to Americans for this merger to happen, but when one looks at the practices Comcast already uses, it paints
Channel Exposure- AT&T is adequate in its point of sales. They intend to match most competitors in using Radio Shack, BEST Buy, Walmart, Mall locations, high visible real estate traffic.
In fact, some of the biggest threats to the company’s growth are the government’s regulation that increases the risk to the underlying business. In addition, the risk of losing the exclusive contract for the iPhone would be a major loss for AT&T. Most of the consumers choose AT&T because of their exclusive contract for the iPhone. Hence, this loss of business will significantly influence the AT&T's profitability and revenue. Moreover, the antitrust authorities play an important role on approved the merger of AT&T.
Effective competition is widely seen as a key to the development of telecommunications services. The ability of new telecommunications networks to interconnect fairly and efficiently with existing networks is critical to the development of competition. AT&T has undergone numerous changes since its inception in the late 19th century. The McKinsey 7 S framework as applied by Pascale is recommended to manage the changes they are facing to adopt a greater competitive presence in the global economy. In conjunction with this framework, numerous other models were applied to analyse the global competitive position of AT&T. Recommendations for a revised strategy and direction for AT&T have been made throughout this document including two scenarios of how the telecommunications industry might develop towards 2000, while outlining the impact on AT&T.
Background One. Tel was launched by Jodee Rich and Brad Keeling in 1995 (Cook, 2001). At first, it looked to get the advantages from deregulation of the telecommunication industry by reselling other network’s capacity and making money through stock market speculation. Rich and Keeling tried to increase the company’s shares rather than profit the company (Cook, 2001). Initially, One.
In addition to these large firms, Apple is always in competition with new start-up firms. As indicated, numerous entrants in the various product lines have come and gone as Apple continues with its product lines. Economies of scale, Product Differentiation, Capital Requirements, switching cost, access to distribution channels, cost disadvantages, and government policies are all barriers to entry to this industry. In some cases, large well funded firms have purchased fledgling companies to allow that company to enter the product market. An example would be AT&T who bought Cingular reportedly to have access to the iPhone, as Cingular had negotiated a contract with Apple for exclusive rights to the new phone.
Telecommunications gained mainstream attention in the early 90’s; however the initial key market was business men and women, who used their phones whilst being on the move and so allowing them to communicate with their companies with ease. Though in the modern era, telecommunication went through segmentation in the market trends, and now in this day and age it would be difficult to find someone who does not own some form of mobile technology. Many phone providers battle to provide the best service for their customers (Figure 1).
There are four major market structures; perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is the market structure in which there are many sellers and buyers, firms produce a homogeneous product, and there is free entry into and exit out of the industry (Amacher & Pate, 2013). A perfect competition is characterized by the fact that homogeneous products are being created. With this being the case consumers have no tendency to buy one product over the other, because they are all the same. Perfect competitions are also set up so that there is companies are free to enter and leave a market as they choose. They are allowed to do with without any type of restriction, from either the government or the other companies. This structure is purely theoretical, and represents and extreme end of the market structure. The opposite end of the market structure from perfect competition is monopoly.
In pure monopoly, there is only one. In monopolistic competition, there are a large number of firms, but not so many as in perfect completion” (2012, p. 556). There are several implications of having a large number of firms in monopolistically competitive market. For instance, they have a small share of the total market. Another implication of having a large number of firms in a monopolistically competitive market is that it’s harder for all of the firms to get together to collude, thus they have a lack of collusion. The third implication is each firm acts independently of the other.
Under the circumstance that the mobile phone industry entered the 3rd generation, Nokia faced competition from both macro level and industry level. For the macro level, the government encouraged competition among the operators and handset manufacturers by giving digital licenses to new entrants. As a result, the mobile phones became more sophisticated, for example, the cameras and the games in the mobile phone. For the industry level, which can be analyzed by the Porter’s Five Forces, (lecture )Nokia was facing threat of new entrants, competitive rivalry and the bargaining power of buyers is increasing as well. As the government encourage completion between the handset manufacturers, there are several new entrants from different countries enter this industry, such as Apple from USA, Samsung from Korea. These new entrants compete with Nokia in both smartphone segment and basic phone segment. Some of them even constructed “ecosystems”, which they could integrate the services and applications quickly, in order to produce the phone in just two days. For the bargaining power of buyers’ aspect, they do not need to rely on the only operating system Symbian. They can choose Windows mobile launched by Microsoft, Android launched by Google and Ios launched by Apple, in addition, basically all of them are better than Symbian (Amiya, 2010). The buyers could choose any