ORLANDO, Fla.—It was the question the packed audience at CTIA Wireless 2011 was waiting for, addressed to Dan Hesse, CEO of Sprint Nextel: What do you think of AT&T’s $39 billion acquisition of T-Mobile USA?
Hesse’s terse reply to CNBC’s Jim Cramer: “My opinion doesn’t matter. I think the FCC and the DOJ …” – a pause as the audience laughed – “…and that’s it.”
AT&T’s deal with T-Mobile loomed large during Tuesday morning’s executive roundtable at CTIA Wireless 2011 as Hesse, whose company was long rumored to have been trying to pursue a deal with T-Mobile, took a seat next to Ralph de le Vega, president and CEO of AT&T Mobility and Consumer Markets, and Dan Mead, president and CEO of Verizon Wireless.
T-Mobile USA CEO Philipp Humm was slated to appear at the roundtable but canceled, as did many T-Mobile executives who had planned engagements at the show. The transaction would make AT&T the largest carrier in the country, leave Sprint in a distant third place and give AT&T and Verizon Wireless a combined market share of nearly 80 percent.
The tension between the three companies leapt off the page and into real life as Mead, Hesse and de la Vega exchanged reserved barbs during their roundtable. But Hesse was serious when it came to a question about what effect further consolidation would have on the U.S. industry.
“If that transaction is allowed to proceed, it will mean a 79 percent market share for the top two providers,” Hesse said. “I do have concerns that [the merger of AT&T and T-Mobile] would stifle innovation and put too much power in the hands of just two.”
Not surprisingly, de la Vega defended the deal, saying it will give AT&T more bandwidth in several key markets where it will soon exhaust its spectrum resources. “As a result of the pending spectrum challenges we’re facing in major cities, this will allow the mobile broadband revolution to continue to grow,” de la Vega said.
De la Vega argued that the combination would ultimately benefit consumers, citing AT&T’s plan to expand its LTE network to additional 46.5 million Americans in both urban and rural areas if regulators approve the merger.
Mead largely stayed clear of the tit-for-tat between Hesse and de la Vega, but said Verizon “will be watching what goes on [with the merger.] There may be a few things market by market that may be of interest.”
Mead did not elaborate, but may have been referring to possible divestitures of T-Mobile assets by AT&T in markets where the deal could be deemed anticompetitive by regulators. Verizon could be interested in acquiring T-Mobile assets divested by AT&T.
When Verizon acquired Alltel in 2008, it was required to divest 2.1 million Alltel customers in 105 markets to get FCC and Department of Justice approval. AT&T bought 79 of the markets.
When asked by Cramer if Verizon had considered buying T-Mobile, Mead said the company “didn’t think there was a need.”
“We’re extremely confident of where we’re at with our assets and what we can deliver to our customers,” he said.
AT&T and T-Mobile’s combined customer base tops 120 million wireless subscribers. Verizon Wireless currently has 94 million customers, making it the largest carrier in the country, but would be pushed into second place by the merger of AT&T and T-Mobile.
It’s not clear whether the roundtable session helped to heal any wounds between the three companies. Hesse was jocular, but it doesn’t appear that he’s ready to lay down the sword just yet.
When asked what he thought about a New York Times headline titled “For Consumers, Little to Cheer in AT&T Deal,” Hesse said: “I have to agree with the Times.”
Filed Under: Carriers
