Credit: Mark Costantini, San Francisco Chronicle
It is no secret that Sprint is formally opposing AT&T’s proposed acquisition of Deutsche Telekom-owned T-Mobile USA in a cash-and-stock transaction valued at approximately $39 billion. Sprint argued the transaction would legalize duopoly in America and asked the government to intervene. The transaction is currently pending federal review by the FCC and Department of Justice, which could take at least a year.
This morning, Bloomberg cast more light on Sprint’s plans to block the deal, which include “nukes” mapped out in red, blue and green ink on a huge whiteboard in the company’s “White Room”. Sprint’s boss Dan Hesse’s used the nuclear tactics analogy in his one-on-one with Bloomberg’s Greg Bensinger, telling the journo that his company has put considerable resources to block this deal:
Clearly, purely, we want to win and block the merger. This one poses real risks.
Hesse is also adamant to spur the public debate around the issues of the merger and lobby Congress to scrutinize the transaction. He enlisted “lobbyists, consulting groups, two former US House Judiciary Committee counsels and lawyers at Skadden, Arps, Slate, Meagher & Flom LLP”. Sprint even “tapped its own engineers to show AT&T how to get more capacity from its wireless network so it wouldn’t need to buy T-Mobile”, the report notes. Then, there’s money. Sprint, the nation’s #3 carrier, has been losing some of its 50 million subscribers to AT&T and Verizon – which both carry the iPhone – in 14 of the last 15 quarters. Their debt-to-capital ratio is 57 percent versus 41 percent for Verizon and 37 percent for AT&T.
While AT&T argues that the acquisition will reduce dropped calls, improve network infrastructure, increase data speeds and bring other goodies, many people are concerned that competition will be basically reduced to Verizon and AT&T, with the latter becoming the nation’s largest wireless provider. This is the sentiment Sprint shared in a March statement:
AT&T and Verizon are already by far the largest wireless providers. If approved, the proposed acquisition would create a combined company that would be almost three times the size of Sprint in terms of wireless revenue and would entrench AT&T’s and Verizon’s duopoly control over the wireless market. The wireless industry moving forward would be dominated overwhelmingly by two vertically integrated companies with unprecedented control over the U.S. wireless post-paid market, as well as the availability and price of key inputs, such as backhaul and access needed by other wireless companies to compete.