AT&T, arguing T-Mobile merger won’t curb competition, talks up smaller rivals
By Ian Shapira and Hayley Tsukayama,
These days, the nation’s second-tier and regional wireless carriers are receiving some glowing advertising from a seemingly odd pitchman: AT&T.
The praise is hardly intended as flattery but is a critical element of AT&T’s strategy to persuade federal antitrust officials that its $39 billion acquisition of T-Mobile will not harm competition in markets across the country.
“Sprint has already achieved substantial success in the marketplace by offering attractive pricing plans and upgrading its smartphone portfolio,” said Joan Marsh, an AT&T vice president focusing on federal regulatory affairs, sounding much like a spokeswoman for the rival company at a news briefing Thursday.
The rivals were not convinced. Sprint and smaller niche players that belong to the Rural Cellular Association countered in dueling media calls and statements Thursday that AT&T’s move to consolidate two of the three largest wireless carriers will crush their business prospects.
“We are certainly flattered that they recognize we are starting to have some success in the marketplace,” Vonya McCann, Sprint’s senior vice president of government affairs, said with a chuckle in an interview. “What we’re concerned about if this transaction is approved is that innovation and competition that consumers are enjoying will cease.”
Whether AT&T will unfairly dominate the industry if it acquires T-Mobile partly depends on whether federal regulators evaluate each individual market across the country or look at the nation as a whole.
In a filing Thursday with the Federal Communications Commission, AT&T contends that competition would remain heated in the nation’s biggest markets.
But Eric Graham, vice president of strategic and government relations at Cellular South, said a market-by-market evaluation is outdated.
One problem that smaller carriers face, Graham said, is getting the latest devices from manufacturers, which look at a company’s nationwide reach when assessing whether to sell their phones with a certain carrier.
“As much as AT&T may want to claim that it will be competitive, carriers must offer nationwide coverage to be competitive,” he said. “It’s all done on a nationwide scale.”
AT&T needs approval from the FCC and the Justice Department to acquire T-Mobile, a process that could take about a year. The agencies will determine whether the bid will reduce wireless phone access, raise consumer prices and create an anti-competitive industry.
If the acquisition is approved, AT&T would have about 130 million customers. Along with Verizon, which has about 100 million, the two companies would control about 80 percent of the market, according to Craig Aaron, chief executive and president of Free Press, a Washington nonprofit group focused on the Internet and media policy.
That would represent an entrenched duopoly, critics say.
“You’re going from four nationwide competitors down to three, so it’s hard to imagine how Sprint is going to be able to keep up with them,” Aaron said. “If Verizon or AT&T want an exclusive deal on a phone, Sprint isn’t going to stand much of a chance. I think AT&T will say anything to give the appearance of greater competition.”
Cathy Sloan, a vice president with the Computer & Communications Industry Association, a Washington-based trade group that opposes AT&T’s merger, added that smaller and regional wireless carriers are at an inherent disadvantage because they must rely on the big carriers such as AT&T for affordable data roaming charges.
“Wall Street analysts and venture capitalists will say, ‘You know, Verizon might charge you so much so you have to raise your prices, so why should we invest in you?’ ” Sloan said.
Marsh, the AT&T vice president, said during the news briefing that the merger would provide cellular service to more than 97 percent of the country. If federal officials blocked the merger, it would take at least eight years for the company to get the same amount of spectrum capacity that it would receive in the merger.
She added that AT&T’s network is facing more severe capacity constraints than its competitors, largely because data demands from smartphones have skyrocketed in recent years.
The only carrier that Marsh criticized was T-Mobile, which is owned by the German company Deutsche Telekom. T-Mobile has exhausted its spectrum, she said, and it does not have the capacity to acquire more. If the merger goes through, she said, AT&T will preserve T-Mobile customers’ pricing plans, but she did not specify for how long.
“T-Mobile was facing significant challenges,” she said. “Its share of subscribers has been falling for nearly two years in the face of increased competition from established players like the resurgent Sprint as well as industry mavericks MetroPCS, Leap and others.”