T-Mobile, Sprint Executives Tell Senate They Must Combine to Remain Competitive

Legere said he met one-on-one with many members of the committee , and “many of you have asked if the new T-Mobile will mean more competition, provide better service, create jobs and drive product innovation. My answer to these questions is an emphatic and absolute 'yes.'” The deal will mean the carrier will be able to offer a robust 5G offering and have lower prices, he said. “We need to combine Sprint and T-Mobile.”

Claure said his company is stable now but lost more than $25 billion over the last 10 years. “Many challenges still remain,” he said. “We still struggle to attract new customers and once we attract them we struggle to keep them. Customer perception of our network still trails our competitors and, to be blunt, we lack the resources to challenge the two dominant players: AT&T and Verizon.” Sprint would need to invest up to $25 billion in the next four years to deploy 5G and that would only support a network largely limited to dense urban areas, Claure said. “Sprint already operates with $32 billion in net debt and we have to struggle to barely break even.”

Ranking member Amy Klobuchar, D-Minn., said the transaction “matters” to the tens of millions of customers of both companies and would “reshape the wireless market.” Wireless connectivity “has become essential for the vast majority of Americans,” she said. “Will a combined T-Mobile/Sprint need to compete as hard,” she said. “Will that competitive energy remain when the lower-cost provider is gone and the merged company is similar in scale to Verizon and AT&T?” Klobuchar said wireless competition has thrived since AT&T/T-Mobile fell apart seven years ago. “I still have concerns” since even four competitors “is not very many given all of the public use of cellphones,” she said. Will consumers really see lower prices as a result of the deal and will innovation continue to thrive, she asked.

Chairman Mike Lee, R-Utah, indicated he has an open mind. Opponents complain about the loss of the two carriers’ prepaid brands and say it will hurt the poor the most, Lee said. “Wireless traffic will continue to grow significantly … at a breathtaking rate” and wireless is critical to consumers and businesses, he said. Competition led carriers to build out their networks better, he said. The merger is horizontal, with both companies offering the same services in the same markets, he said. “The nation’s antitrust laws forbid combinations of firms that may substantially lessen competition because this is all about the consumer." But mergers also offer the potential to make companies stronger, he said.

Consumer groups testified the deal should be denied. “Competition, not consolidation, is the best way to achieve the best mix of coverage, next-generation technologies, and affordable plans,” said Public Knowledge President Gene Kimmelman. “There are many different combinations of spectrum, coverage and network upgrades that carriers can deploy to provide what consumers want.”

“We are concerned that this merger would significantly curtail … competition, leaving consumers paying more and getting less,” said George Slover, senior policy counsel at Consumers Union. Slover conceded the transaction may help both get to 5G faster but that isn’t the main concern of consumers. “What consumers want is the most leverage they can get through effective choice,” he said.

Technological change, not the number of players, is what matters most, countered Roslyn Layton, visiting scholar at the American Enterprise Institute. It doesn’t matter how many “horse-and-buggy” companies are in the market, she said. “You’re going to drive in a car.” AT&T and Verizon have a huge jump on T-Mobile and Sprint and the two need to combine their assets to catch up, she said.

Lawrence said that in a 2012 DOJ post he was part of a small team that looked at AT&T/T-Mobile the previous year. “I worked on drafting court documents and doing legal research,” he said then. “In a case of this magnitude, I had to pay extra attention to every single detail.”

Klobuchar asked Legere and Claure what happened since the last time the two companies discussed it but didn’t combine. “As we see 5G coming in we saw what we can do together that we can’t do separately,” Legere said. “AT&T and Verizon have maintained the status quo and we’ve been able to take some competition to them, but not the way we can compete.” Claure said this is the right time. “5G is upon us,” he said: “Maybe two years wasn’t the right time, probably two years from now” won’t be, either.

International Center for Law & Economics scholars said regulators shouldn’t base a decision on the “fallacy” the U.S. needs four national wireless carriers, an assumption they said “has plagued the antitrust assessment of wireless-industry mergers” in past years. “The agencies should shun the mechanical application of obsolete market-share and concentration presumptions that could wrongly condemn the merger,” they said.

The Communications Workers of America said T-Mobile and Sprint should commit to addressing potential job losses. Some 26,000 jobs are expected to go as a result of retail store closures, with another 4,000-5,000 coming from the elimination of overlapping headquarters staff, CWA said Tuesday. Legere said the combined company would add, not cut employees.