AT&T to Congress: T-Mobile buy good for consumers

The phone giant's CEO defends the proposed acquisition to lawmakers, who question the company about market concentration and potential job losses.

Executives from AT&T and T-Mobile visited Capitol Hill for the second time this month to defend the $39 billion deal announced in March in which AT&T would swallow its smaller rival and create a dominant wireless carrier with more than 129 million subscribers.

Lawmakers don't have a say over whether the merger gets approved. That's up to the Justice Department and the Federal Communications Commission. But the House Judiciary Committee hauled the top executives from both companies as well as industry experts to Washington to explain how the deal could be good for consumers.

"This transaction is all about consumers," said Randall Stephenson, AT&T's chairman and chief executive. "It's about keeping up with consumer demand. It's about giving consumers what they expect--fewer dropped calls, faster speeds, and access to state-of-the-art mobile broadband Internet service."

At the same time, René Obermann, chief executive of T-Mobile parent company Deutsche Telekom, argued that the mobile carrier is struggling to compete against much larger rivals like AT&T and Verizon at the same time it tries to survive in an evolving marketplace against new technologies, including voice over IP services such as Skype.

"T-Mobile has been caught in the middle of this dynamic marketplace and has had an increasingly difficult time competing," Obermann said. T-Mobile, he added, lost 471,000 customers in the last quarter alone.

"I thank you for your evasiveness on this issue so I don't have to come back next year and say they promised not to cut jobs."
--U.S. Rep. John Conyers (D-Mich.)

Stephenson and T-Mobile USA chief executive Philipp Humm appeared before the Senate Judiciary Committee on May 11, making many of the same arguments. (See list of related CNET articles .)

The executives faced the toughest questioning today from Rep. John Conyers, the Michigan Democrat who acknowledged at the very beginning of the hearing that he "never met a merger that I liked." Conyers opined that mergers always cost jobs, reduce competition, and hurt consumers. He commented that Stephenson never mentioned anything in his testimony about the impact of the deal on employment.

"I thank you for your evasiveness on this issue so I don't have to come back next year and say they promised not to cut jobs," Conyers said.

Stephenson later testified that there will be some short-term job losses in corporate functions that overlap. But, he said, history has shown that jobs increase within wireless mergers. AT&T has doubled the employees in its wireless division since it acquired Cingular, as part of its BellSouth acquisition.

"There are redundancies," Stephenson said. "We will not need two finance organizations. We will not need two marketing organizations...(But) it should be a job creator. It always has been."

The deal also faced some criticism from Andrew I. Gavil, an antitrust law professor at the Howard University School of Law, who's concerned about the growing concentration of power in the hands of just a few companies. He worries that market-leader Verizon, along with AT&T after it acquires T-Mobile, will be so dominant as to marginalize the only other major carrier, Sprint. The two large companies would have unprecedented power over the wireless industry.

"I am deeply concerned that the proposed merger presents very substantial risks of anticompetitive effects across multiple dimensions of competition," Gavil testified. "Hence, the question I am asking myself, and the one I urge you to ask as well, is this: 'Why would we want to take the risk?'"

About the author

Jay Greene, a CNET senior writer, works from Seattle and focuses on investigations and analysis. He's a former Seattle bureau chief for BusinessWeek and author of the book "Design Is How It Works: How the Smartest Companies Turn Products into Icons" (Penguin/Portfolio).

 

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