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Consumer advocates oppose AT&T buyout of T-Mobile

Higher prices may lie ahead if AT&T successfully merges with smaller but spunkier counterpart T-Mobile, consumer advocates warned Monday, because the $39 billion deal would wipe out one of the wireless market's more notable low-cost players.

Higher prices may lie ahead if AT&T successfully merges with smaller but spunkier counterpart T-Mobile, consumer advocates warned Monday, because the $39 billion deal would wipe out one of the wireless market's more notable low-cost players.

For consumers in the Philadelphia region, of particular concern may be whether T-Mobile retains high marks from users, given that T-Mobile and behemoth Verizon scored well ahead of AT&T in a recent regional survey, said Paul Reynolds, electronics editor of Consumer Reports in Yonkers, N.Y.

But in the iPhone race, T-Mobile contract-holders eager to switch to the popular smartphone could find themselves with an option, given Apple's exclusive relationships with AT&T and Verizon.

The pros and cons will be debated for months, as the megadeal is at least a year away from being approved or rejected by federal regulators. Consumer analysts said its elements would be examined carefully since it would give AT&T dominance over the U.S. cellular market.

"I think at this point, the potential cons outweigh the pros, as far as we can see," said Reynolds, whose parent company, Consumers Union, has a public-policy staff in Washington eager to help frame the regulatory debate the Federal Communications Commission will undertake on the potential antitrust concerns.

"It's early, and there are a lot of questions about this deal," Reynolds said. "Our advocacy folks in D.C. at Consumers Union are feeling like it's difficult to find a big upside for consumers in this."

If approved, the marriage of the two companies would eliminate T-Mobile as a freestanding entity and combine its 34 million wireless subscribers with AT&T's 96 million.

Although smaller than industry leaders AT&T and Verizon, T-Mobile has made a name for itself as an aggressive competitor delivering less expensive cellular plans to more cost-conscious users.

"If you believe that you'd like to have some choice, [the merger] is a bad direction because there's only going to be three major players in cell phones - Sprint, AT&T, and Verizon - in the U.S.," said CNET senior editor Scott Stein, who reviews iPads, laptops, technology trends, and mobile computing for the New York consumer-electronics website.

AT&T chairman and chief executive officer Randall Stephenson heralded the proposed deal with T-Mobile USA, announced Sunday, for bringing two companies together with compatible technologies - something that could yield immediate benefits for a company like AT&T, whose crammed user network has grown exponentially in recent years.

"This produces something that no other transaction could produce: an immediate lift to capacity, an immediate improvement in service quality," Stephenson said in a video statement.

He also expressed confidence that prices would not necessarily rise as a result of the sale of T-Mobile USA to Dallas-based AT&T by Deutsche Telekom AG, of Germany.

"I think you'll continue to see a very aggressive competitive environment in this industry, and we feel very good about the competition," Stephenson said. "It's fierce today; it'll be fierce tomorrow."

Details about how, exactly, the merger would play out for users of either company's cellular networks remained unclear.

AT&T and T-Mobile share key technologies, including GSM-based networks that allow their phones to be used widely overseas, as well as on U.S. soil.

Would T-Mobile phones seamlessly operate on AT&T's networks? Would T-Mobile customers be required to switch to AT&T phones after the merger? These are among the questions consumer advocates have.

Another, said CNET's Stein, is whether T-Mobile customers would run into problems once AT&T's speedier fourth-generation (4G) cellular network, currently under construction, is completed.

"It may also be a problem in terms of contracts," Stein added. "T-Mobile has had very competitive contracts, comparatively. People have picked T-Mobile because of cost factors a lot of the time. Whether that means T-Mobile customers may have to switch to more expensive plans remains to be seen."

Quality is another issue entirely.

A September survey of Consumer Reports readers ranked T-Mobile and Verizon highest in "overall satisfaction," Reynolds said.

Verizon garners the most satisfactory record in many cities, he said. But in the Philadelphia region, T-Mobile "was right up there, competitive with them."

"And AT&T," Reynolds said, "was significantly behind T-Mobile."

That survey considered all aspects of cell phone performance, from ease of making voice calls to text messaging, data use, and contacting customer service, he said.

"Will service to people now getting T-Mobile start to be more like the AT&T experience?" Reynolds asked. "That's going to be a step back for T-Mobile."

Wired Together

Key facts about the telecom firms seeking to merge.*

                        AT&T Inc.      T-Mobile USA

 Headquarters            Dallas         Bellevue, Wash.

Owner                  Shareholders   Deutsche Telekom

Wireless

subscribers               96 million      34 million

Wireless revenue         $58.5 billion   $21.3 billion

U.S. wireless rank      No. 2            No. 4

Employees               266,590         37,795

Wireless operating

profit margin            40.7%   29.2%

Annual customer

turnover                  1.31%   3.40%

*Data as of, or for the year ended, Dec. 31, 2010.

SOURCES: AT&T, Associated Press

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