Case Study: Merger Of T-Mobile And AT & T

Decent Essays
1. Did the Department of Justice make the right decision when it blocked the merger of T-Mobile and AT&T? Why or why not?
Yes, the Department of Justice made the right decision when they blocked the merger of T-Mobile and AT&T Wireless
i. If these two companies merged, there would be less competition in the mobile service market. ii. Less competition would cause the economy to suffer because less revenue would be generated. iii. Customers would have to be faced with higher prices for mobile service which may would result to less sales and profits because they would not be able to afford it. iv. Because of the merger between these two companies, other small mobile service providers looking to join the market would be discouraged because of them
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Reduces the competition by reducing the number of companies which are there in the industry resulting to the company having to spend less time on taking undue stress about how to tackle competition and concentrate more on improving its product.

2. Gives companies the benefit of economics of scale because as the size of company increases, price per unit of production for product decreases.

3. It is easier for top management of the acquiring company to manage the target company which is in the same business rather than taking over a company which has a completely different business, therefore chances of top management successfully handling both the companies increases in case of horizontal merger. 1. Increases the chances of merged company having monopoly powers due to sheer big size of merged company and we all know that a company having monopoly powers will tend to exploit customers by charging higher price than normal from its customers and hence in the end it is the customer who has to suffer.

2. Difficult to integrate the culture, employee behavior and other such things of two companies which are merged and if company is unable to achieve the integration then the whole idea of merging the two businesses may result in failure of the merged
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It results in locking of capital of the company which could have been used for some other profitable projects and hence company should consider opportunity cost of capital before going for vertical merger.

Conglomerate Mergers
Advantages Disadvantages
1. Helps the company in diversification hence a company is less vulnerable to losses due to decline in sales in one sector or industry
2. It is also helpful when the company has excess cash but does not have enough opportunities for growth investing in the same industry
3. It increases the customer base of the company and hence company can cross- sell its products to the new customer base which in turn leads to increase in the sales of its core products leading to higher profits for the company.

1. Company taking over another company without having any experience about the industry.
2. Mismanagement and overpricing the target company increase substantially
3. Company shifting its focus from its core business to other business which in turn results in company performing poorly in both areas.
4. Difficult to merge cultural values, employees behavior and other such

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