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Verizon's CEO Wants AT&T and T-Mobile Merger to Succeed
There have been several dramatic events over the last few months regarding the AT&T and T-Mobile proposed merger. Sprint & Cellular South have both filed lawsuits attempting to block the union, and several consumers groups, including the and the FCC, and a dozen other companies have chimed in against it. Even the US Department of Justice filed a lawsuit to block the acquisition.
However, not everyone agrees that the deal would be a bad thing. In fact, just recently, Lowell McAdam, Verizon's CEO made public comments recommending the merger. Here's what he had to say,
His statement also happens to be interesting timing, as he came forward just before the first meeting between AT&T and the Government on Wednesday. Although his logic seems sound, it's not hard to deduce some other reasons why Verizon would be vocal about this. Ultimately, they will likely benefit from this merger, indirectly. If AT&T were to acquire T-Mobile and effectively eliminate one of their competitors, it would ease pressure on Verizon, to keep competitive pricing on plans and phones. In other words, Verizon and AT&T would have amazing power to regulate prices and drive their only real competition left, Sprint, straight out of the market. It's like a game of Texas Holdem Poker, the players with the biggest pots can take bigger risks and eventually force the smaller players out of the game.
"We need to be very thoughtful on what the impacts would be to the overall industry if this is a way to regulate the industry without actually passing regulation," McAdam said at an investor conference. "I have taken the position that the AT&T merger with T-Mobile was kind of like gravity. It had to occur, because you had a company with a T-Mobile that had the spectrum but didn't have the capital to build it out. AT&T needed the spectrum, they didn't have it in order to take care of their customers, and so that match had to occur."
In fact, AT&T wants this merger so much, lately they have been offering to sell some of their spectrum to other smaller carriers, even Sprint, in order to entice the Government to allow the merger to go through. Ironically, this flies in the face of Mr. McAdams argument that AT&T really needs the spectrum that badly. If that were true, then why would spectrum be the first thing they were willing to offer up as a concession?
To play devil's advocate, Sprint's Dan Hesse made some comments recently hinting at the idea that a Sprint and T-Mobile merger would be a better idea, and that the DoJ's objections to the AT&T/T-Mo merger would not be a factor if that were to happen. Here was his statement,
He was speaking hypothetically, and you could tell he was trying to dance around it as much as possible; however, his statements edged close to the idea that Sprint may want to stop this for their own reasons.
"But you could make a very, very strong argument, I believe, that if you have two value players that, let's say, got together, that gave them more scale and a better cost structure to compete with the twin Bells, that is an advantage that outweighs having a smaller three and four."
Regardless of what Sprint's designs are, the deal still seems "fishy" and the primary consensus from what can be gathered across multiple sources is that this deal would prove to be a negative thing for consumers and innovation. What do you guys think? Is Verizon just trying to influence things for their own interests? Is AT&T being sneaky about trying to give up some of their spectrum to smaller competitors, or do they really need the spectrum? Is Sprint just jealous that T-Mobile wants to merge with AT&T? Do you think this merger will fail or go through? Sound off.
Source: Android.net via PhoneArena
09-22-2011 12:27 PM