1/N. Short thread on T-Mlobile/Sprint merger. There were 2 theories:
(A) It's a 4-to-3 merger that will lower competition and increase markups.
(B) The new merged entity will be able to take on the industry leaders ATT and Verizon.
(A) and (B) make clear predictions.
(A) It's a 4-to-3 merger that will lower competition and increase markups.
(B) The new merged entity will be able to take on the industry leaders ATT and Verizon.
(A) and (B) make clear predictions.
(A) predicts the merger is good news for ATT and Verizon's shareholders.
(B) predicts the merger is bad news for ATT and Verizon's shareholders.
The news leaked at 6pm that the judge would approve the merger. Sprint went up 60% as expected.
Let's test the theories.
(B) predicts the merger is bad news for ATT and Verizon's shareholders.
The news leaked at 6pm that the judge would approve the merger. Sprint went up 60% as expected.
Let's test the theories.
Here is Verizon's after trading price: Up 2.5%. 
Here is ATT after hours: Up 2%.
Conclusion 1: Theory B is bogus, and the merger is a transfer of at least 2%*$280B (att) + 2.5%*$240B (Verizon) = $11.6 Billion from the pockets of consumers to the pockets of shareholders.
Conclusion 2: I and others have argued for a long time that theory B was bogus; this was anticipated. But lobbying is very effective indeed...
Conclusion 3: US consumers already pay two or three times more than those of other rich countries for their cell phone plans. The gap will only increase.
And just a reminder: these firms invest 0% of the excess profits.
And just a reminder: these firms invest 0% of the excess profits.
