AT&T is approaching smaller rivals including MetroPCS Communications and Leap Wireless International to sell spectrum and subscribers as part of an attempt to save its $39 billion takeover of T-Mobile USA Inc., Bloomberg reports.
AT&T has also reached out to CenturyLink, Dish Network and Sprint Nextel Corp. to gauge their interest in buying assets, Bloomberg says.
Some may question the viability of those remedies, if the Department of Justice objection really is that the acquisition violates the concentration index it routinely uses.
One of the ways to measure market concentration is the Heffindahl-Hirshman Index or HHI, often used as a measure of market concentration. The HHI is the square of the percentage market share of each firm summed over the largest 50 firms in a market. Here is the pre-merger market HHI which already suggests that the market is uncompetitive. HHI is the problem
For some of us who just want a quick rule of thumb that tells you when there is potential antitrust concern, 30 percent market share tends to work.That has been the figure cable TV executives in the United States have worried about, and which the Federal Communication Commission at one point set as the limit of subscriber market share for any U.S. cable operator. Both AT&T and Verizon Wireless already have market share that exceeds that figure.
The Justice Department will generally investigate any merger of firms in a market where the HHI exceeds 1,000 and will very likely challenge any merger if the HHI is greater than 1,800. With a HHI over 2,300 any deal will be heavily scrutinized and most likely rejected. Even a merger between T-Mobile USA and Sprint, with a resulting 28 percent market share, would probably not be allowed on the same antitrust grounds.
AT&T has also reached out to CenturyLink, Dish Network and Sprint Nextel Corp. to gauge their interest in buying assets, Bloomberg says.
Some may question the viability of those remedies, if the Department of Justice objection really is that the acquisition violates the concentration index it routinely uses.
One of the ways to measure market concentration is the Heffindahl-Hirshman Index or HHI, often used as a measure of market concentration. The HHI is the square of the percentage market share of each firm summed over the largest 50 firms in a market. Here is the pre-merger market HHI which already suggests that the market is uncompetitive. HHI is the problem
For some of us who just want a quick rule of thumb that tells you when there is potential antitrust concern, 30 percent market share tends to work.That has been the figure cable TV executives in the United States have worried about, and which the Federal Communication Commission at one point set as the limit of subscriber market share for any U.S. cable operator. Both AT&T and Verizon Wireless already have market share that exceeds that figure.
The Justice Department will generally investigate any merger of firms in a market where the HHI exceeds 1,000 and will very likely challenge any merger if the HHI is greater than 1,800. With a HHI over 2,300 any deal will be heavily scrutinized and most likely rejected. Even a merger between T-Mobile USA and Sprint, with a resulting 28 percent market share, would probably not be allowed on the same antitrust grounds.
| U.S. Carrier Market Concentration based on Subscribers | ||
| Company | Pre-MergerMarket Share | MarketShareSquared |
| Sprint Nextel | 17% | 412.3106 |
| Verizon | 34% | 583.0952 |
| AT &T | 31% | 556.7764 |
| T-Mobile USA | 11% | 331.6625 |
| MetroPCS | 3% | 173.2051 |
| Leap Wireless | 2% | 141.4214 |
| U.S. Cellular | 2% | 141.4214 |
| Herfindahl-Hirshman Index | 2339.8925 |
It isn’t clear how much of T-Mobile USA AT&T can shed to satisfy DoJ that there is not an HHI problem, because, by definition, AT&T already has an HHI problem.
If the issue is the HHI, some divestitures won't help. HHI is the issue
Oddly enough, even the oft-suggested merger of Sprint and T-Mobile USA might now be impossible for regulatory reasons, and that had not been among the big concerns observers have mentioned about that particular pairing. The big issues there were seen to be incompatible networks and the complexity of managing four air interfaces at a time. If DoJ sticks with the HHI test, regulatory approval would have to become the biggest obstacle.
