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.

A T-Mobile store is seen at 7th Avenue and 49th Street on March 23, 2012 in New York City. T-Mobile USA announced they would be eliminating 1,900 call-center jobs in an effort to cut costs.
National Journal
Laura Ryan
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Laura Ryan
June 17, 2014, 12:11 p.m.

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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