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AT&T CEO: T-Mobile Deal Serves Consumers AT&T CEO: T-Mobile Deal Serves Consumers

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Technology / TECHNOLOGY

AT&T CEO: T-Mobile Deal Serves Consumers

Randall Stephenson, chief executive officer and president of AT&T, expressed confidence that the deal—which would combine AT&T, the nation’s second-largest wireless carrier, with T-Mobile, the country’s fourth-biggest—would win approval from the Federal Communications Commission and the Justice Department following a review that could last 12 months.(Spencer Platt/Getty Images)

photo of David  Hatch
March 21, 2011

AT&T Chairman and CEO Randall Stephenson expressed confidence on Monday that regulators will approve his company’s $39 billion acquisition of T-Mobile and portrayed the deal as a boon to consumers.

But members of Congress and consumer advocates were already weighing in with their doubts about whether the deal would be a blessing or a curse for Americans, and lawmakers promised they would not let the companies sail through the takeover unchallenged.

“This will improve network quality, it will give more customers access to more services,” Stephenson said in a telephone briefing.

 

He said it would bring the next generation of wireless service—known as 4G—“to virtually every community across the United States."

He expressed confidence that the deal—which would combine AT&T, the nation’s second-largest wireless carrier, with T-Mobile, the country’s fourth-biggest—would win approval from the Federal Communications Commission and the Justice Department following a review that could last 12 months.

Yet early indications are that policymakers are worried about the implications of removing a major national wireless competitor from the marketplace. “It is absolutely essential that both the Department of Justice and the FCC leave no stone unturned in determining what the impact of this combination is on the American people,” Senate Commerce Chairman Jay Rockefeller, D-W.Va., said in a statement.

Echoing the concern, Senate Antitrust Subcommittee Chairman Herb Kohl, D-Wis., promised in a statement to "take a close look at what this loss of competition will mean for people who increasingly rely on wireless phone service to connect to friends, family and the Internet."

House Judiciary Chairman Lamar Smith, R-Texas, vowed to hold a hearing, saying in a statement that "Congress must take a close look at the plan to ensure that the proposed merger promotes a healthy and competitive telecommunications market."

The Obama administration and the FCC have been seeking to promote wireless technology as a way to expand broadband service to more Americans. During his State of the Union address, President Obama called on wireless carriers to provide advanced wireless broadband connectivity to 98 percent of the nation within five years.

At the same time, many experts worry about a looming shortage of spectrum, a consideration that Stephenson and other AT&T executives on the call said was a major motivation for the merger. “Capacity pressures will continue to grow,” said Stephenson, who added that combining forces with T-Mobile would help alleviate those pressures. “Any time we’ve increased speeds, usage has jumped.”

In January, the administration approved another giant communications deal—the combination of Comcast and NBC Universal—with substantial conditions, despite calls from a wide range of opponents for the joint venture to be blocked.

While AT&T is second to Verizon in wireless customers, it is the nation’s largest telecom carrier overall. AT&T has combined with several large players along its path to the top, including Cingular Wireless in 2004, SBC Communications in 2005, and BellSouth in 2006.

But Stephenson emphasized that a steady expansion of the wireless sector has spawned an array of formidable competitors, including Clearwire, Cricket Wireless, and MetroPCS, with more on the way. He also cited statistics indicating that wireless prices have fallen during the spate of AT&T mergers.

"At a very high level, we don’t believe the government, even a Democratic administration, is stubborn about maintaining four as opposed to three nationwide wireless carriers," the investment firm Stifel Nicolaus said in an advisory. Nevertheless, "we believe it will be concerned about the prospect of a weak and weakening nationwide number three, with a fractured set of also-rans, moving toward a wireless duopoly."

The firm warned that the Justice Department might seek to block the deal, depending on its review of market competitiveness and the willingness of the merger parties to agree to divestitures. While Stephenson said he doesn't think spin-offs are necessary, he did say: "As in the past, we understand we will have to discuss divestitures."

A Sprint spokesman took a dim view of the potential merger, saying the deal “would alter dramatically the structure of the communications industry.”

“A combined AT&T and T-Mobile would be almost three times the size of Sprint, the third-largest wireless competitor,” Sprint’s John Taylor said via e-mail. “If approved, the merger would result in a wireless industry dominated overwhelmingly by two vertically integrated companies that control almost 80 percent" of the U.S. market for wireless subscription service.

Consumer advocates are worried that a combined AT&T and T-Mobile, which already rank low in some customer satisfaction surveys, would control too much of the wireless business.

“Don’t believe the hype: There is nothing about having less competition that will benefit wireless consumers,” Free Press Research Director Derek Turner said in a statement. “And if regulators approve this deal, they will further cement duopoly control over the wireless market by AT&T and Verizon,” he added, warning of higher prices and fewer choices.

“The wireless market, now dominated by four big companies, would have only three at the top,” said Gigi Sohn, president and co-founder of Public Knowledge. “We know the results of arrangements like this—higher prices, fewer choices, less innovation.”

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