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Head of AT&T Forecasts Doom for Sprint/T-Mobile Merger Head of AT&T Forecasts Doom for Sprint/T-Mobile Merger

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Head of AT&T Forecasts Doom for Sprint/T-Mobile Merger

The merger hasn't even been officially proposed yet, but AT&T's chief is already predicting failure.

(Getty Images)

photo of Laura Ryan
June 17, 2014

AT&T's chief thinks a push for a Sprint/T-Mobile merger would meet the same fate as AT&T's own failed bid for the "mobile maverick."

Even though the merger hasn't been officially proposed yet, AT&T Chairman and CEO Randall Stephenson said Tuesday it is a "stretch" to see how it would get regulators' nod of approval, because it would reduce competition in the wireless industry from four major carriers to three.

He's not just bitter about AT&T's expensive breakup with T-Mobile after regulators blocked its $39 billion deal in 2011. According to Stephenson, regulators made their reasons for blocking the AT&T/T-Mobile in 2011 crystal clear: The merger would reduce competition.

 

"There were not other major issues. That was the issue, and that's what they came after," he said during an interview with David Rubenstein, CEO of the Carlyle Group, for an event hosted by the Business Roundtable. "As you think about Sprint and T-Mobile combining, I struggle to see how that is not four going to three."

T-Mobile has arguably become more of a "mobile maverick" under the leadership of CEO John Legere, who joined the company in 2012. Legere's aggressive price-slashing strategy has reverberated throughout the wireless market.

"[Regulators] won't want to see that to go away," Stephenson said.

But AT&T's chief doesn't necessarily think the merger shouldn't pass.

"Obviously, if I thought they should approve ours, it would be hard for me to suggest that they shouldn't approve that one," he said.

Breaking up with T-Mobile cost AT&T a cool $3 billion in cash and $1 billion in spectrum, and a failed merger would also cost Sprint a pretty penny. If the Sprint/T-Mobile merger fails, Sprint is rumored to have agreed to pay T-Mobile at least a $1 billion breakup fee, according to recent reports of a tentative $32 billion merger agreement between the third- and fourth-largest mobile carriers.

"It's a pretty good business model," Stephenson quipped.

Although Sprint sued to block the AT&T/T-Mobile merger in 2011 because it would mean "higher prices and less innovation" for consumers, the company and its owner, the Japanese telecom Softbank, are arguing that a Sprint/T-Mobile merger is different because it would help the two smaller carriers actually compete against Verizon and AT&T.

CORRECTION: A previous version of this article misstated the amount that AT&T paid T-Mobile after their 2011 merger failed. 

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