Sprint Asks Regulators to Block AT&T Purchase of T-Mobile

"AT&T and Verizon are already by far the largest wireless providers,” Sprint said in a statement. “If approved, the proposed acquisition would create a combined company that would be almost three times the size of Sprint in terms of wireless revenue and would entrench AT&T’s and Verizon’s duopoly control over the wireless market.” If the deal goes through, the wireless industry “would be dominated overwhelmingly by two vertically integrated companies with unprecedented control over the U.S. wireless post-paid market, as well as the availability and price of key inputs, such as backhaul and access needed by other wireless companies to compete."

"The U.S. wireless market is intensely competitive, with five or more competitors in 18 of the top 20 markets,” AT&T said in response. “The AT&T T-Mobile merger will improve quality for consumers, provide a near-term solution to spectrum exhaust, and expand the availability of LTE to 95 percent of Americans, spurring innovation and economic growth.”

"As we said last week, we strongly believe that this transaction is good for AT&T customers and T-Mobile customers, and is very much in the public interest given the benefits it will bring to 95% of all Americans,” said AT&T Senior Executive Vice President Jim Cicconi. “We have always found that the most constructive course is to focus on our own strategies for serving our customers and building our business rather than becoming distracted by challenging the business strategies of others.”

Sprint’s release does not include a statement by Hesse. But Vonya McCann, senior vice president-government affairs, said the FCC and Department of Justice both should block the transaction. “This transaction will harm consumers and harm competition at a time when this country can least afford it,” McCann said.

Larry Krevor, Sprint vice president-government affairs, said in an interview it’s difficult to overstate the threat to competition. “AT&T and Verizon would control 76 percent of total industry revenue, 72 percent of all industry subscribers,” Krevor said. “Those who have been around this business for a while see this as the recreation of the cellular duopoly that was initially in place when we created this industry.” From the mid-1980s to mid-1990s, there were only two wireless competitors, noted Krevor, who was at the FCC at the time. “That was a time when prices didn’t go down,” he said. “There wasn’t any innovation. Wireless remained a privilege for executives who could afford it.”

Krevor said Sprint doesn’t see any merger conditions that would make the deal more palatable. “We think it needs to be blocked,” he said. “We think there’s a compelling case on antitrust grounds at the DOJ and, certainly, on public interest grounds at the FCC that it should be blocked."

Clearwire also objected. The proposed AT&T/T-Mobile merger raises “very serious concerns about ongoing competition within the wireless market,” a spokesman said. The combination would result in “an unhealthy concentration of power by two massive vertically integrated companies” across both wireless and landline industries, he said. The company said the government must consider the long-term affect of the proposed deal on competition, suppliers and consumers.

The most interesting aspect of Sprint’s statement of opposition is the timing of it, coming a week and a day after the deal was first announced, said Medley Advisors analyst Jeff Silva. The delay in Sprint registering its official position could be due to internal deliberations relating to whether such a stance might backfire if Sprint were to become an acquisition target of Verizon in the future, he said. Now that Verizon has indicated it’s not interested in buying the No. 3 wireless carrier, Sprint is free to go hard negative on the deal, he said. “Sprint’s efforts to persuade the FCC and Justice Department to block the merger could become a major factor in the debate over the proposed AT&T/T-Mobile union in light of the company’s assertion that such an acquisition would harm consumers and competition -- two key themes that comprise a common thread running throughout numerous FCC rulemakings,” he said. “Also, it appears Sprint would like to use the proposed merger to highlight its oft-stated concerns about the special access market."

"I don’t think this is posturing by Sprint. They feel this deal would fundamentally alter the balance of power in the wireless market,” said Paul Gallant with MF Global.

Rural Cellular Association President Steve Berry, meanwhile, said in an e-mail he expects data roaming provisions and 700 MHz interoperability stipulations to be part of the deal if the FCC clears the merger (CD March 28 p1). A data roaming order is slated for a vote at the FCC’s April 7 meeting. “I think data roaming is clearly an issue that gets done -- but not because of ATT’s generosity -- they have opposed it all along,” Berry said. “The FCC added this to the agenda before the T-Mobile announcement. They lost this one already. The FCC recognizes the need for data roaming. They should not get credit for remorse of their actions to not provide reasonable roaming agreements earlier.” Berry added, “RCA members and emergency responders need interoperability. AT&T will have to address this issue.”