Sprint/T-Mobile Could Be Doomed From Start, AT&T CEO Says
The same logic that tanked AT&T/T-Mobile could kill any attempted Sprint purchase of T-Mobile, AT&T CEO Randall Stephenson told an Economic Club of Washington, D.C. luncheon Tuesday. The government “shot our deal down” with its complaint that the industry was being consolidated from four national competitors to three (CD Dec 20/11 p1), said Stephenson, who thinks the Comcast/Time Warner Cable will go through.
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If Sprint and T-Mobile combined (CD Feb 6 p1), “I struggle to see how that is not four going to three,” Stephenson said, especially when “T-Mobile is still the maverick in the marketplace.” It “seems like it would be a stretch for them to get to yes,” he said. If it were up to Stephenson, though, the deal would go through. “Obviously, if I thought they should have approved ours, it would be hard for me to suggest they shouldn’t approve that one,” he said.
"I'm not sure Sprint/T-Mobile is apples-to-apples with AT&T/T-Mobile in terms of competition analysis,” said Guggenheim Partners analyst Paul Gallant. “But I agree with his instinct that regulators are still likely to challenge the deal.” Sprint and T-Mobile spokespeople did not comment.
As for AT&T/DirecTV, that would be a net positive for consumers, Stephenson told reporters after the event. “DirecTV needs a broadband product. We need a profitable TV product. And so you put the two companies together, we think it’s a very synergistic benefit for the consumers."
"It’s too early to talk about” any conditions the FCC might place on the deal, Stephenson told us. He reiterated AT&T’s prior commitments to various “concessions,” including building broadband to 15 million households that wasn’t in the plans before, pricing stand-alone TV on a nationwide basis, and making a stand-alone broadband product available for people who would prefer not to subscribe to a TV service.
As for Comcast/Time Warner Cable, “I don’t see why it won’t be approved,” Stephenson told the crowd. “They don’t overlap with each other” -- a key point in the antitrust review process, he said. “I don’t see why it would not pass antitrust muster,” he said, adding that he suspects it will have some conditions placed on it, such as for program access.
AT&T/DirecTV is unlike the other consolidation going on the market these days, Stephenson told reporters. Comcast/Time Warner Cable is a “classic cable company buying another cable company”; Sprint/T-Mobile would be “a wireless company buying another wireless company.” AT&T’s deal is different, he said: “We're basically a mobility and broadband company, but we're buying a video company, so it’s a very different type of acquisition than the other two."
U.S. mobile Internet performance is still “well ahead” of anywhere else in the world, Stephenson told the audience. The mobile Internet has “yet to emerge” in Europe, he said. “It’s getting better, but it’s still not up to standards of most places in the world.”
"In terms of pure regulatory oversight, Canada may be the best place going right now,” Stephenson said: Tax law and regulation make it a good place to do business. “I evaluate a regulatory environment based on how much investment is attracted into that environment.” Still, although “we complain a lot about the U.S. regulatory environment … in telecom we have to be doing something right, because there is more investment happening in telecom in this country than in any place in the world,” he said.
Investment is crucial to keep a company afloat, he said. “In this industry, if you're not a top-tier investor, it’s not that you don’t succeed, it’s that you may not survive,” he said. “It’s ugly” if a company misses even one technology innovation cycle, he said, pointing to BlackBerry as an example. “You cannot afford to miss” a technological innovation cycle, he said. “If you're not investing, you're going to die.”