The CEO of Sprint told a Senate panel Wednesday that if the AT&T-T-Mobile USA merger is approved, his company will have a tough time surviving and could be a target for a takeover.
Skeptical senators questioned AT&T about what the deal would do for consumers during the first congressional hearing on AT&T’s proposed $39 billion acquisition of T-Mobile USA.
“My position is that it would make it more difficult for us to compete,” Sprint’s Dan Hesse told the Senate Judiciary Antitrust, Competition Policy, and Consumer Rights Subcommittee.
“I have not said we won’t survive. In that environment, the real question is if this is approved... it puts us in a position to be acquired.”
Sen. Al Franken, D-Minn., voiced strong concerns about the merger and asked Subcommittee Chairman Herb Kohl, D-Wis., to hold more hearings on the issue. Kohl also expressed concern over the deal.
“The burden will squarely be on AT&T and T-Mobile to convince us why this merger is necessary, how it will benefit consumers, and to put aside our suspicion that it may very well harm competition,” Kohl said.
There were several questions about the deal’s impact on future investments and jobs and whether it would lead to better wireless service in rural areas.
"Can you say it will lead to lower prices?" Sen. Amy Klobuchar, D-Minn asked.
AT&T Chairman, President and CEO Randall Stephenson maintained that such deals have historically led to price declines. And several times, he reeled off facts on how specific states, particularly those represented by members of the panel, would benefit from the deal through improved service in rural areas.
While Democrats focused on the harm that could come from the merger, some Republican lawmakers questioned AT&T and T-Mobile about the effect on its rollout of next-generation wireless service if it does not merge with T-Mobile.
Noting that he would rather see industry take the initiative instead of government, Sen. John Cornyn, R-Texas, questioned how the merger would affect the buildout of wireless broadband. Stephenson repeatedly noted that AT&T has invested more in the United States than any other public company.
Sprint is now the third-biggest wireless provider, and would remain a distant third if the merger goes through, while No. 2 AT&T would leapfrog Verizon to become the nation’s biggest wireless provider.
Hesse and other critics argue that AT&T and Verizon would control 80 percent of the national market and effectively enjoy a national duopoly if the merger goes through. They say no conditions will fix the merger and want regulators to block it.
Stephenson said AT&T still faces considerable competition at the local level and that the merger will allow it to more effectively compete with smaller regional players like Metro PCS. He said federal regulators have traditionally looked at the impact on competition at the local level rather than nationally.
Stephenson said that in order to meet the growing demand for data services and next-generation wireless broadband, AT&T needs to obtain additional capacity. He said T-Mobile’s network has "complementary assets."
"Without the deal, a spectrally-constrained AT&T and capital-constrained T-Mobile would be able to provide much less vigorous competition separately than would the more efficient, combined company," T-Mobile USA CEO Philipp Humm echoed.
Cellular South CEO Victor Meena argued that AT&T has used its market power to obtain exclusive handset deals and has been unwilling to strike data roaming deals with smaller players like his firm.
Public Knowledge President Gigi Sohn and Hesse also scoffed at Stephenson’s claim that AT&T competes aggressively at the local level. Hesse argued that, like the other major wireless players, 99 percent of Sprint’s customers are on national rate plans and most of its advertising is targeted to a national audience.
"Have you ever seen AT&T advertise against Metro PCS? Have you ever seen a local pricing plan?" Sohn asked. “Clearly, the market here is national, and I suspect that the Department of Justice and the FCC will look at that based on the facts of this case.”
After the hearing, a confident Stephenson told reporters that if regulators examine the deal based on the facts, he was optimistic that the merger would be approved.