Sprint flags AT&T merger issues

Michael Carroll
24 Mar 2011

US carrier Sprint’s chief executive has highlighted the difficulties Deutsche Telekom and AT&T face in gaining regulatory approval for the sale of T-Mobile USA.

Dan Hesse expressed his concerns about the deal during a panel session at the CTIA conference yesterday, claiming it will give rivals Verizon and AT&T too much control over the US market. The pair will cover around 80% of the country if AT&T’s takeover of T-Mobile clears regulators.

That power worries Hesse, who believes it gives the big two the ability to stifle innovation in the market, the Washington Post reports.

It is that very point that the Federal Trade Commission will have to judge in order to make a decision on whether to clear AT&T’s acquisition. The US carrier and Deutsche Telekom have given plenty of leeway on final closing of the deal with a target date of 1H12, which could suggest they anticipate a long and arduous regulatory road ahead.

Not everyone is convinced the road is that rough, however. ABI Research analyst Aapo Markkannen believes the combined AT&T and T-Mobile will shed spectrum “and other assets in many areas where it operates,” to gain approval for the deal. The method might take time, but should be effective, he states. “[T]he deal will go through in one form or another.”

Colleague Mark Beccue believes the biggest hurdle will be pricing. With T-Mobile regarded as a value brand, most of its customers face a hike in fees that will likely see many of them seek alternative services. Beccue states AT&T is unlikely to stand in the way of the exodus “as they do not view them as profitable.”

Gartner analyst Phillip Redman agrees the deal will pass eventually, telling TelecomAsia that competition will remain robust with five players in all US markets. He said Sprint now has the opportunity to position itself as “the only value-play in the US market,” and notes the carrier is likely to benefit from the concessions AT&T and T-Mobile make to gain approval for the deal.

Redman also believes the AT&T acquisition will push Sprint to seek its own merger, predicting a partnership with a non wireless player.

Verizon chief Daniel Mead has already ruled out a partnership with Sprint, Reuters reports.

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