T-Mobile USA, the wireless company AT&T Inc. is trying to acquire, may lose three times the number of contract subscribers this year as in 2010 as the U.S. Justice Department’s attempt to stop the deal is hampering the company’s ability to cut prices and creating concerns among users.
The fourth-largest U.S. wireless operator will see the number of customers on monthly contracts decline by about 1.2 million, compared with a drop of 390,000 the year before, according to the average estimate of six analysts surveyed by Bloomberg.
That would give the company 33.5 million total customers and 25.2 million contract subscribers by year’s end.
T-Mobile’s market share losses are being exacerbated because it’s refraining from the aggressive price cuts it has used in the past, said Craig Moffett, an analyst with Sanford C. Bernstein & Co. Though price cuts have helped the company attract customers in the past, they may now aid the Justice Department in making its case T-Mobile should remain independent because it helps suppress prices for consumers, he said.
“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,” said Moffett.
The Justice Department sued in August to block AT&T’s proposed $39 billion takeover of T-Mobile, a unit of Deutsche Telekom AG, saying that such a deal would “remove a significant competitive force from the market.” AT&T said in a response last month that the deal would not inhibit competition and would allow the combined companies to offer high-speed wireless services more rapidly and broadly.
