Sprint sees its doom in AT&T deal


Dan Hesse, chief executive officer of Sprint Nextel Corp., right, looks on as Philipp Humm, president and chief executive officer of T-Mobile USA Inc., speaks during a Senate Judiciary Committee hearing on the AT&T/T-Mobile merger. (Andrew Harrer/BLOOMBERG)

Sprint Nextel’s chief executive told members of Congress on Wednesday that permitting the merger of rivals AT&T and T-Mobile would be the end of his company in its current form.

Dan Hesse, who runs the third-largest of the nation’s telecom companies, said Sprint would probably be absorbed by someone else and customers nationwide would suffer if AT&T is allowed to complete its $39 billion bid to buy T-Mobile.

“It would fundamentally put us in a situation where this is a duopoly (industry) and it puts us in position to be acquired,” Hesse said in the Senate antitrust subcommittee hearing.

The duopoly he was talking about would be comprised of AT&T and Verizon, who together would serve 80 percent of all wireless contracts. AT&T would have 130 million users and Verizon just shy of 100 million.

At a distant third, with 50 million users, Sprint wouldn’t be able to compete by itself, he said.

In the hearing, the first since the deal was announced in March, lawmakers grilled the chief executives of AT&T and T-Mobile on whether the merger would lead to less competition and ultimately higher prices for consumers.

Democratic lawmakers said they feared the best new technology would go to the biggest firms, perpetuating their ability to dominate the industry. Several lawmakers invoked memories of AT&T’s monopoly days, when prices for calls were out of reach for many households.

No lawmakers flatly said the union should be blocked. And lawmakers do not decide on the fate of the deal. The transaction is being reviewed by the Justice Department and the Federal Communications Commission. AT&T chief Randall Stephenson said to reporters after the hearing that he expects the review to take about one year.

But members of Congress can influence the opinions of regulators, analysts say. And strong opposition could make it harder for the companies to convince Justice’s antitrust officials or the FCC to approve the deal with as few conditions as possible.

“The burden will squarely fall on AT&T and T-Mobile to convince us why this merger is desirable ... and to put aside our suspicion that it may very well turn out to harm competition,” said Sen. Herb Kohl (D-Wis.), chairman of the subcommittee.

Stephenson said the market is competitive, with new service providers such as Metro PCS and Leap attracting low-cost consumers. He said regulators need to look at the merger through an analysis of local wireless markets, where those smaller companies are gaining traction.

“The U.S. wireless marketplace is one of the most competitive in the world, and it will remain so after this transaction,” Stephenson said.

Consumers, he said, shouldn’t expect a hike in prices after the deal. But he stopped short of promising Sen. Amy Klobuchar (D-Minn.) that he wouldn’t raise prices for consumers after the deal.

He said T-Mobile customers would be able to retain their current contracts if the merger is approved. But he said those service plans — known for being a low-cost alternative — wouldn’t be offered to AT&T customers.

Consumer groups, including Public Knowledge, which testified against the deal, argued the merger would eliminate the nation’s lowest-cost carrier — T-Mobile. Consumers Union, the author of Consumer Reports, authored a study that showed T-Mobile service contracts were on average 50 percent cheaper than those of AT&T.

Cecilia Kang is a staff writer covering the business of media and entertainment.
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