Monday Morning Sour Grapes from Sprint on AT&T, T-Mobile Merger

By Tracey E. Schelmetic March 21, 2011

In a case of Monday morning sour grapes, Sprint thinks the merger between AT&T and T-Mobile is a really bad idea.

For those of you who missed it, AT&T yesterday announced the purchase of T-Mobile for $39 billion from Deutsche Telekom. The combination of the nation’s No. 2 and No. 4 wireless companies will shuffle the card deck quite a bit. AT&T is now in the No. 1 slot (or will be, once the acquisition is complete), followed by former leader Verizon and, bringing up the rear, Sprint, according to Digital Trends.

So, why the sour grapes? If you've been paying attention, there were rumors earlier this month that Sprint was actually in talks with Deutsche Telekom to buy T-Mobile. That merger, between players Nos. 3 and 4 in the U.S. wireless market, would have increased Sprint's clout.

Instead, AT&T has now snatched up T-Mobile, leaving Sprint a distant third behind the other two companies. As you might imagine, this is not a welcome turn of events. Sprint has issued an official statement responding to the acquisition, laying out in rather succinct terms exactly why the joining of AT&T and T-Mobile may be bad for business, or, as Sprint puts it, “innovation and robust competition.”

The combination of AT&T and T-Mobile USA, if approved by the Department of Justice (DOJ) and Federal Communications Commission (FCC), would alter dramatically the structure of the communications industry. AT&T and Verizon are already by far the largest wireless providers. A combined AT&T and T-Mobile would be almost three times the size of Sprint, the third largest wireless competitor. If approved, the merger would result in a wireless industry dominated overwhelmingly by two vertically-integrated companies that control almost 80% of the US 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. The DOJ and the FCC must decide if this transaction is in the best interest of consumers and the US economy overall, and determine if innovation and robust competition would be impacted adversely and by this dramatic change in the structure of the industry.

Come to think of it, Sprint may have a point. Federal regulators are going to have their work cut out for them in gauging whether or not this deal can be made.


Tracey Schelmetic is a contributing editor for TechZone360. To read more of Tracey's articles, please visit her columnist page.

Edited by Tammy Wolf

TechZone360 Contributor

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