AT&T / T-Mobile Merger Getting No Rubber Stamps from Senate

May 12, 2011
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Yesterday, the US Senate held a hearing on the AT&T / T-Mobile merger, titled "Is Humpy-Dumpty Being Put Back Together Again?”. If the name is not enough indication, a quick perusal of the transcript show some major suspicions on the part of Senators towards the deal. Senators Herb Kohl (D-WI), Michael Lee (R-Utah), Amy Klobuchar (D-MN), Chuck Grassley (R-Iowa), Al Franken (D-MN), John Cornyn (R-TX), and Richard Blumenthal (D-CT) wanted explanations as to why this merger was necessary, and why they should allow AT&T to absorb a competitor, bringing them back to near-monopoly status.


The senators did not hold back on voicing their concerns about the merger. Take a look at these opening comments: "A few years ago, consumers had the choice of no fewer than six national carriers...is putting the control of such a vital economic sector in just two or three companies good for our country?"

"The burden will squarely fall on ATT and T-Mobile to convince us."

AT&T CEO Randall Stephenson said, "First and foremost, this transaction is about consumers - it's about keeping up with consumer demand, and giving them what they expect: high speeds, fewer dropped calls, and 4G coverage." Phillip Humm, CEO of T-Mobile USA said that T-Mobile faces "spectrum exhaust" in a number of significant markets, and that they lack the ability to launch LTE.

Sprint CEO Dan Hesse, and Cellular South CEO Victor Meena obviously disagreed with the benefit to consumers from this merger. Hesse: "Creating an entrenched, integrated duopoly will stifle competition... AT&T's takeover of T-Mobile will turn back the clock on wireless innovation." He also called AT&T and Verizon "the Twin Bells." Meena said that this merger would open the door for Verizon to acquire Sprint, leaving only two major carriers, "there is no third option," he said.

In an interesting exchange, Senator Kohl asked, "Does T-Mobile view AT&T as a competitor?“, and Humm danced around the question for a bit, so he tried his luck with Stephenson: "Okay. Mr. Stephenson, is it even credible to say that T-Mobile isn't a competitor?" Stephenson replied, "They’re not our competitive focus. We’re focused on Verizon, they lost customers. They’re not our competitive focus." Kohl had repeated scoffed at AT&Ts hedging on this point: "Come on. You guys are major competitors. Please."

There are major concerns as to whether this merger will help or hurt consumers, and many T-Mobile customers are very unhappy about the prospect of becoming AT&T customers. We have discussed before the fact that even if this merger goes through, AT&T will have to make some major concessions, likely giving up some part of T-Mobile to Sprint. It's an interesting situation, and AT&T definitely faces an uphill climb to convince the American people, and the FCC.


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