T-Mobile CEO Hallucinates Competitors In Bid To Sell Competition-Killing Sprint Merger
from the learning-from-history dept
Time and time and time again, U.S. telecom companies have promised us that better customer service, lower prices, and more competition is only possible if the latest industry mega merger is approved. But time and time again those promises not only don’t materialize, but the deals wind up making an already broken market worse. As a result, the telecom sector sees historically awful customer service, higher prices, and all manner of additional problems ranging from broadband coverage gaps to net neutrality and privacy violations (both symptoms of limited competition).
Everybody’s favorite villain, Comcast, is a direct result of mindless M&A mania where upgrades, customer service, and genuine innovation took a repeated back seat to growth for growth’s sake. So is AT&T, who we’ve allowed to slowly but surely re-assemble itself in the wake of Ma Bell’s 1982 breakup. And despite history being very fucking clear on the negative impact of telecom consolidation, here we are again bearing witness to the same, age old idiotic “synergy” claims as T-Mobile tries to sell the press and public on its planned $26 billion acquisition of Sprint.
As we noted previously this deal simply isn’t necessary. Those pushing this merger like to pretend that Sprint was on the brink of collapse and simply couldn’t survive without this merger. And while Sprint does have a heavy debt load and has been arguably incompetent on the branding and PR front, the company just announced what it’s calling the “best financial results in company history.”
There were numerous partnership and funding options that wouldn’t have involved killing one of just four major competitors, and eliminating jobs for anywhere between 10,000 and 30,000 human beings. Eliminating one-fourth of the industry’s major competitors simply reduces the incentive to genuinely compete on price. It’s simply not debatable ( industry-funded think tanks are already busy trying to muddy the logic waters, though you’ll note that even here the farmed enthusiasm is a bit more tepid than normal).
Trying to sell the deal, T-Mobile CEO John Legere spent much of this week trying to insist that reducing competitors somehow increases competition. To do so, the company tried to claim in an announcement that the public shouldn’t worry, because somehow the combined Sprint T-Mobile would still have “7 to 8” big competitors to keep them in line:
“This isn?t a case of going from 4 to 3 wireless companies ? there are now at least 7 or 8 big competitors in this converging market. And in 5G, we?ll go from 0 to 1. Only the New T-Mobile will have the capacity to deliver real, nationwide 5G,? added Legere. ?We?re confident that, once regulators see the compelling benefits, they?ll agree this is the right move at the right time for consumers and the country.”
That is, for lack of a more technical term, bullshit. Both companies are on record stating they don’t need a merger to deploy 5G. And while there certainly are a number of scattered regional players and wireless MVNOs that offer tepid competition in several areas, they’re far too small to apply any real downward pricing pressure on giants like AT&T, Verizon and SprinT-Mobile. AT&T and Verizon enjoy a monopoly over the business data service market that feeds tower backhaul, and AT&T, Verizon and T-Mobile collectively dominate the nation’s limited spectrum holdings, the spectrum auction process, and all but own many state and federal regulators and lawmakers.
And while Comcast and Charter are both considering getting into the wireless sector, those WiFi-centric efforts lean heavily on Verizon Wireless’ network, and none of the companies involved in those relationships want to encourage a real price war. It’s also worth remembering that Legere spent most of last year mocking those efforts as “irrelevant” and destined for failure:
“Comcast?s Xfinity Mobile is ?very irrelevant, and I assume that [Charter?s soon-to-launch mobile service] will be irrelevant squared,? Legere said. ?The furthest thing from my mind is any concern about the impact of cable.”
Now, with a mega merger to sell, Legere is nimbly pivoting on a dime to claim these “irrelevant” competitors will somehow keep the combined T-Mobile and Sprint on its best behavior. That’s not how any of this works. As sectors consolidate and competition wanes the remaining companies always do their best to avoid genuine price competition, which is why the United States (and Canada) see some of the highest prices for mobile data in the developed world (OECD data). That we have to keep having this conversation is puerile and insulting.
Curiously, there’s some rumblings out of the DOJ that Trump antitrust officials don’t see as many problems with this merger as they do AT&T’s $86 billion merger with Time Warner, which they’re suing to block in court (and losing, by most accounts):
#breakingnews–doj officials tell @FoxBusiness that anti trust division finds @sprint – @TMobile deal less problematic than @att – @twxcorp
— Charles Gasparino (@CGasparino) April 30, 2018
DOJ officials who believe that eliminating competitors somehow creates competition should probably go back and take a closer look at the DOJ’s arguments when it blocked AT&T from acquiring T-Mobile back in 2011. The central tenet of their argument was that a reduction of genuine, large competitors by a fourth would dramatically harm consumers, and that logic remains historically justified. Blocking that deal encouraged T-Mobile to compete more intensely. And while price competition in wireless still tends to be somewhat theatrical in nature, T-Mobile went on to dramatically impact the industry for the better, helping drive the elimination of things like long-term contracts and annoying early termination fees, and encouraging a return to unlimited data.
As Canadians can attest, there’s simply no good reason for letting an already marginally-competitive sector consolidate any further. Combining Sprint and T-Mobile won’t create a stronger, more viable competitor for AT&T and Verizon, it will create an environment where the remaining carriers have less incentive to compete on price than ever before. Despite decades of evidence on this front, when it comes to mindless M&As we seem intent on ignoring the lessons of history.
Filed Under: broadband, competition, john legere, merger, mobile
Companies: sprint, t-mobile
Comments on “T-Mobile CEO Hallucinates Competitors In Bid To Sell Competition-Killing Sprint Merger”
Us splits MaBell because of monopoly. Decades later, everybody and the Govt fuse into a giant dystopian MaBell. Ah, the wonders of short memory.
They broke up Bell supposedly to create jobs … which then mostly went to Canada.
Re: Re: Re:
I think you mean by “went to Canada” as replaced with Nortel switches computers automate things those obs are just gone, I saw an interview with the founder of mitel the other day, talking about how important it was to protect IP, that is a name I have not here in many years and as far as I can tell the are only a patent company, something that should not be allowed, but the government of Canada is spending 85 million dollars to protect them NAFTA will be “renegotiated” with more and stronger Capital extortion clauses and the US will join TPP with all of what they wanted in IP law, silently with no coverage.. that’s my prediction more automation more restrictions on thought.
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Or the jobs were never created because of the companies refusal to build out, upgrade, or in some cases even maintain their infrastructure despite being given every incentive in the book to do so. Doesn’t take many more people to maintain what you have, even less if you work your employees to death.
In short they are greedy just like any corp, and now we’re rewarding their greed with even more money and even lower expectations to get that money. Ah, lasefaire Capitalism at work. (Scrwing society over one company at a time.)
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Ma Bell was no longer allowed to force customers into leasing the phones in your home which resulted in a market for phones. Customer had many choices, from old dial to the new touch tone phones – one simply had make sure you did not exceed your supplied ringer current.
Anyways … most of these new phones were sold by Canadian firms.
…which is still called AT&T. They’re not even trying to hide it.
Hell, ISPs will fake pro-repeal voters, why not fake competitors too?
Capital is giving you cancer..
No wait I mean it is a cancer, it must grow an unlimited amount, poisoning every human being, and murdering civilization and we are going to do nothing.
Re: Capital is giving you cancer..
Life today sucks so bad, what with indoor plumbing, electricity, airline travel, the Internet, antibiotics, antiseptic surgery, air conditioning, restaurants, recorded music, cinema, etc.
We were much better off in the Middle Ages, when we could enjoy watching 2/3 of our children die before they were 10 years old.
Bode, you lie about Comcast. Now you lie about T-Mobile?
How much is the EFF paying you? Or should I say, your pirate overlord Google?
There once was a Richard of Bennett
Who mindlessly screamed the same tenet:
“My overlord Pai
Would not tell a lie
Cuz he got approved by the Senate!”
You provide no evidence or proof he’s wrong.
Try again Richard.
“There were numerous partnership and funding options that wouldn’t have involved killing one of just four major competitors,…”
Numerous? Name one that the owner of Softbank hasn’t already tried and failed. No one was willing to drop billions on a failing company, then drop tens of billions in order to improve the worst network in America.
But hey, it’s much easier to write hit pieces not based in reality.
competes with T-Mobile.
Even better: $0/Gbyte.