For my term paper, I am proposing to research the successful merger between SBC Communications and Ameritech Corporation that is now commonly known as AT&T. Subsidiaries of SBC included those of Southwestern Bell, Pacific Bell, Nevada Bell and Cellular One acting as a global leader in the telecommunications industry competing with Ameritech over millions of access lines and a growing wireless customer subscription base across the US as well as several other countries. The United States filed a civil antitrust case in 1999 to enjoin the transaction under which SBC would acquire Ameritech believed to be in violation of a horizontal merger. Economist Roger D. Blair defines a horizontal merger as occurring “whenever two firms that compete with each other in the same market are brought together under common control. For a merger to be deemed horizontal, the firms must have been rivals prior to their combination.” Rightfully so, this case caught the attention of consumers once numbers revealed a possible monopolizing impact. The combination would be known as the second-largest merger in corporate history at the time …show more content…
I find this case of importance due to the fact it was once a large merger many people doubted advantageous, however it has become a market with vast options and competitive pricing affordable to the consumer. At the closing of the stock exchange on April 9th 2017, AT&T clocked in at $40.59 while one of its current largest competitors Verizon beat it at $48.66. This intrinsic value measure goes to show other competition since has arisen and the original ruling seems to have been fair. Verizon also sits one position ahead as 5th most valued brand of 2016. History proves this wasn’t always true. I seek to evaluate the United States original claim of a horizontal merger and further provide support to why the ruling under such stipulations was condemned beneficial to the
and fair one. Many believe it to be the first anti- trust decision in U.S.
During the nineteenth and twentieth century monopolizing corporations reigned over territories, natural resources, and material goods. They dominated banks, railroads, factories, mills, steel, and politics. With companies and industrial giants like Andrew Carnegies’ Steel Company, John D. Rockefeller’s Standard Oil Company and J.P. Morgan in which he reigned over banks and financing. Carnegie and Rockefeller both used vertical integration meaning they owned everything from the natural resources (mines/oil rigs), transportation of those goods (railroads), making of those goods (factories/mills), and the selling of those goods (stores). This ultimately led to monopolizing of corporations. Although provided vast amount of jobs and goods, also provided ba...
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 ...
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.
The proposed merger between Comcast and Time Warner Cable would make it the largest provider of cable in America and give it unprecedented market power and allow it to continue to pursue profits and the cost of consumers. While it would not be a monopoly, it would be giving the company dangerous power. Already Comcast has control of one of the largest media providers in America, NBC. It has significant control of internet as well, and has made Netflix pay Comcast to have faster speeds. The question now isn’t if the merger will be bad for business, it is if the United States government will make the right choice for
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
The purpose of this paper is to attempt to recompile information about the merger of two corporations; one of many taking places i...
In the horizontal integration, the company product range is from a wide clientele. That is they sell product either clothing or luxurious foods from different manufacturers. These give them the edge since the products they offer a variety for the customers to choose from, and hence they can shop less than one roof (Cole, 1997). In the vertical integration strategy, the firm will deal substantial with products from a single supplier and M&S gets the exclusive rights to deal with the product and its supply to the market. This is necessary when the company aim is to serve an identified target market which is exclusive and has the potential to sustain and grow the company substantively. These employ a tar...
The soft factors can make or break a successful change process, since new structures and strategies are difficult to build upon inappropriate cultures and values. These problems often come up in the dissatisfying results of spectacular mega-mergers. The lack of success and synergies in such mergers is often based in a clash of completely different cultures, values, and styles, which make it difficult to establish effective common systems and structuresBased on the case study, extensive research and annual reports of AT&T the writer has mapped AT&T in the different domains. AT&T should strive to attain a perfect circle as close to the centre as possible, which indicates total synergy, order and equilibrium. Where the circle is skewed drastic change is needed as it moves closer to the outer ring of chaos:
The Standard Oil case illustrates how a vertical relationship can create horizontal market power. Granitz and Klein argue that in such a case, the vertical relationship should not be the central aspect of concern for antitrust agencies. It was the explicit horizontal conspiracy by the railroads with the help of Standard that jointly fixed rail rates and railroad market shares. “Such horizontal collusive behavior is clearly anticompetitive, and would be anticompetitive even if there were no vertical connection between Standard and the railroads” (Granitz and Klein 1996, p. 45). They conclude their article by stating that their detailed analysis did not support any new antitrust policy that would condemn a vertical relationship in the absence of a horizontal conspiracy.
By 1997, Sprints customers had grown to seven million local service customers running hundreds of televisions ads touting their superior long-distance service and basking competitors, but Sprint was still in fourth place among wireless carriers, like Verizon, Cingular, and AT&T (Schiesel, 2001). WorldCom Inc., the new parent of MCI, offered $115 billion for Sprint in October 1999 which would’ve created an enormous new company. McCraken (2012) finds, Sprint stockholders approved of the merger in April 2000, but federal regulators ruled that it should not go through. After a nine-month hold, many top executives cashed out and left and the buckle of the WorldCom merger set back some of Sprint’s plans. In late 2001, telecommunications market was
The business relationship between Starbucks and Kraft Foods was formed in 1998 when the companies struck a contract deeming Kraft the exclusive provider of Starbucks’ packaged coffee and thus limiting Starbucks’ selling flexibility. The partnership was strong and profitable for twelve years, which resulted in a sales increase from $50 million to $500 million in 2010. Consequently, because of this growth and the popularity spike in coffee pods, Starbucks wanted additional selling flexibility. As a result, in August of 2010, Starbucks offered to buy Kraft out for $750 million, however Kraft refused declaring that the offer was well below fair market value. Despite the refusal, Starbucks dissolved the relationship and the companies engaged in a feuded negotiation they could not settle on their own. Thus in 2013, an arbitrator determined that Starbucks breached its contract and therefore had to pay Kraft $2.75 billion. In the following sections, we further explore the negotiation between Starbucks and Kraft Foods, and make comprehensive recommendations as to how both parties could have performed more satisfactorily (nytimes.com).
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.
‘Horizontal Merger’ is when two companies with similar products join together. ‘Vertical Merger’ is two companies at different stages in the production process. ‘Conglomerate Merger’ is when two different types of companies join together. ‘Market extension merger’ is between two companies who produce the same product but sell in different markets. ‘Product Extension merger’ is between companies with related production but they do not compe...