Will Sprint, T-Mobile $32B Merger Raise Mobile Prices?

Jun 5, 2014 9:02am

Morning Money Memo….

Sprint and T-Mobile are close to dialing up a merger, according to reports this morning. A deal between America’s third- and fourth-largest mobile operators would be the latest example of consolidation in the telecommunications industry. A $32 billion merger may be announced within days. Sprint would buy T-Mobile for about $40 a share in cash and stock – 17 percent more than yesterday’s closing price. “It would be three strong competitors and that’s what the Sprint people are talking about,” says wireless industry analyst Jeff Kagan. “Will prices come down? I don’t know. But I don’t think prices are going to go up.” Consumer groups argue that less competition means higher prices. But in this case a combined Sprint and T-Mobile could mean more competition for the wireless industry leaders AT&T and Verizon. The talk of this deal comes on the heels of big mergers announced between Comcast and Time Warner Cable, and AT&T and DirecTV. “The competitive nature, the pricing, the services: they’re all going to change,” says Kagan.

The European Central bank has cut two key interest rates in an attempt to keep the 18-nation eurozone economy from falling into deflation. The ECB reduced its benchmark refinancing rate from a record low of 0.25 percent to 0.15 percent. More drastically, it cut the rate it pays on money deposited by banks from zero to minus 0.1 percent. Charging banks for parking funds with the ECB is an unusual step aimed at pushing banks to lend that money rather than hoard it. The ECB moves are aimed at spurring the weak recovery and raising inflation that’s dangerously low at 0.5 percent. Low inflation has raised fears that Europe may slide into outright deflation, a crippling downward price spiral.

Walmart is quietly making a series of changes in its ranks of top executives, and a major reason could be linked to recent corruption scandals in the giant retailer’s international department. “It has been more than two years since accusations of widespread bribery surfaced about Walmart de México, drawing a host of investor lawsuits and a United States government investigation into Walmart’s global operations,” reports the New York Times. The newspaper published a lengthy investigative report in 2012 into alleged corruption. By next month almost every top executive “who held critical positions when corruption scandals engulfed the company’s international division,” will longer be with the company, says The Times. Walmart holds its annual shareholders meeting today in Bentonville, Arkansas. The Justice Department declined to confirm or deny any Walmart investigation.

Amazon is reportedly working on a smartphone and now a date has apparently been set. On June 18, CEO Jeff Bezos will host an event Seattle, according to a link on YouTube teasing the announcement. The phone may feature 3D technology, making objects appear to leap off the screen.

Netflix is blaming Internet service providers when consumers face problems with streaming video. Users have been sent direct messages by Netflix. Yuri Victor, a user experience designer for Vox Media, posted a photo on Twitter of a Netflix message that read: “The Verizon network is crowded right now. Adjusting video for smoother playback.” The push-back by Netflix is part of a growing campaign by Internet video providers to tell consumers about slow download speeds.

Richard Davies Business Correspondent ABC News Radio abcnews.com Twitter: daviesnow

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