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4/18/2011
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AT&T Rebuts Attacks By Sprint CEO

Sprint chief Dan Hesse, a foe of AT&T's proposed acquisition of T-Mobile, said "wireless innovation will be jeopardized" by the deal.

Sprint CEO Dan Hesse addressed reporters at the Commonwealth Club in San Francisco on Friday. The topic of the day was Sprint's newest sustainability efforts, which included the announcement of Sprint's first environmentally conscious Android smartphone, the Samsung Replenish. That didn't stop Hesse from making remarks about AT&T's proposed acquisition of T-Mobile, though.

"Competition will be stifled, growth will be stifled, and wireless innovation will be jeopardized," he said. "We just can't let this happen."

Combined, AT&T and T-Mobile would be the nation's largest carrier with 130 million customers. Verizon Wireless would rank second, with about 100 million, leaving Sprint and its 50 million a distant third. The merger has received a lot of pushback across industries.

"If allowed to push forward [the merger] would push the wireless industry into a duopoly," he said. "Innovation is at risk and green initiatives [in the wireless industry] are at risk."

Apparently, AT&T has had it with Hesse's relentless attacks on the merger. On Friday, AT&T published a post in its policy blog taking Hesse to task for inconsistencies in his own arguments.

"We have great respect for Dan Hesse as an executive, but his comments today about AT&T's merger with T-Mobile are way off base," wrote AT&T spokesman Jim Ciconni. "They're also totally at odds with his own past statements. As recently as last October, Mr. Hesse said the wireless industry is 'hyper competitive'. In February of last year, Mr. Hesse said, 'M&A is absolutely a way to get the growth in the industry, if a particular transaction makes sense for anybody.'"

Sprint stands to lose more than just about any other company in the wireless industry. Today, it is the third-largest service provider, behind Verizon and AT&T, but ahead of T-Mobile. If allowed to merge, the combined AT&T and T-Mobile and Verizon Wireless would own 80% of the market. What did Sprint say in January 2010 about mergers? "I think consolidation will be healthy for the industry, some consolidation. It is, needless to say, very competitive."

AT&T said in response to these comments, "Given that Sprint is a major competitor to AT&T in the hyper competitive wireless market Mr. Hesse describes, no one should be surprised that they would oppose this merger. But it is self-serving for them to argue that the highly competitive wireless market they cited only months ago is now threatened by the very type of transaction they seemed prepared to defend previously."

AT&T's right to point out Hesse's inconsistent remarks about the state of competition in the wireless industry, but that doesn't make Hesse's current beliefs wrong. It is hard to see how the merger is going to help U.S. consumers, as AT&T claims.

AT&T says that the merger will bring broadband to more people--especially those in rural areas--sooner. The company hasn't provided any evidence to prove this. It also argues that its urban customers will have better service once the AT&T and T-Mobile networks are merged. That's possible, but a lot of it will depend on how the FCC draws lines in the markets where AT&T and T-Mobile both already have a large amount of overlap. AT&T even goes so far as to cite how the merger will help the National Broadband Plan. The company also reiterates that the market is already highly competitive and will remain so after the merger.

For its part, the Federal Communications Commission announced last week that it has begun the formal review process of this merger. AT&T will need to convince the FCC and the Department of Justice that it won't harm the competitive nature of the market. That's a tall order.

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