Sprint, T-Mobile Try To Sell The Public On A Job-Killing, Competition Eroding Megamerger

from the more-of-this-shit dept

Sprint and T-Mobile are once again talking megamerger. The two companies tried to merge in 2014, but had their romantic entanglements blocked by regulators who (quite correctly) worried that the elimination of one of just four major players in the space would eliminate jobs, reduce competition and drive up costs for consumers. Emboldened by the Trump FCC's rubber stamping of industry desires, the two companies again spent much of last year talking about a potential tie up, though those efforts were ultimately scuttled after the two sides couldn't agree on who'd get to run the combined entity.

But the two companies appear to have settled their disagreements, and over the weekend announced they'd be attempting to merge once again as part of a $26 billion deal. Executives for both companies spent most of the weekend trying to convince the public that dramatically reducing competitors in the sector would magically somehow create more competition:

Of course that's not how competition works. While T-Mobile has had a net positive impact on the wireless sector on things like hidden fees and absurd international roaming costs, the four major carriers had already been backing away from promotions so far this year as they try to avoid something the telecom sector loathes: genuine price competition. As our friends in Canada can attest, reducing the overall number of major competitors from four to three only reduces the incentive for real price competition even further. It's simply not debatable.

And while the two companies are trying to claim that Sprint couldn't have survived on its own, that's not really true. The company's debt load is notable, but with Japanese owner Softbank the company had slowly but surely been getting a handle on its finances. And if a deal was inevitable for survival, there's plenty of potential merger partners (from Dish Networks to a major cable company like Charter Spectrum) that could have been pursued without eliminating a major competitor.

The two companies are also amusingly trying to claim that the deal will somehow create jobs:

And while that's adorable salesmanship, it's indisputably false. History has proven time, and time, and time again that such consolidation in telecom erodes competition, jobs, and quality service. Mindless M&A mania is a primary reason why you all loathe Comcast, since growth for growth's sake consistently means service quality takes a back seat.

Wall Street analysts had previously predicted that a tie up between the two companies could result in the elimination of anywhere from 10,000 to 30,000 jobs (the latter being more than Sprint even currently employs) as redundant retail locations, middle managers, and engineers are inevitably dismissed. And while both companies are spouting the usual lines about how "nothing will really change," anybody that has lived through a deal like this one (or, say, just paid attention to history) should realize the folly of such claims.

Whether the deal will be approved by the Trump administration is uncertain. While the Ajit Pai run FCC has made it abundantly clear it's willing to rubber stamp every fleeting sector desire regardless of its impact (net neutrality, privacy), the Trump DOJ has become a bit of a wildcard in the wake of its lawsuit to thwart the AT&T Time Warner merger. Some analysts see the deal as having only a 40% chance of approval, though Sprint and T-Mobile are trying their best to pander to the Trump admin by claiming that the miracles of next-gen wireless (5G) can only arrive if they're allowed to merge.

But there's a reason both companies announced the deal on a Sunday when everybody was napping or tending to the lawn. There's also a reason they're trying to rush this deal through now before adult regulatory supervision inevitably returns at the FCC. And that's again because this deal, like so many telecom sector megadeals before it, will only benefit investors and shareholders, not the public or the internet at large. Since companies can't admit that these deals are largely harmful to anybody but themselves, we get obnoxious sales pitches that aggressively ignore common sense -- and history.

Filed Under: antitrust, competition, consolidation, doj, fcc, jobs, john legere, marcelo claure, mobile
Companies: sprint, t-mobile


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  1. icon
    James Burkhardt (profile), 1 May 2018 @ 10:27am

    Re: LOL, re: the TechDirt acquisition plan

    Sprint has already seemed to turn a corner financially. Techdirt mentioned in in the article. Recent financial reports show positive improvement on the fiscal front.

    Moreover, using Sprint (a big name) rather than some upstart MVNO might make the bundle feel worth more. Humans value brands, after all.

    I note that this article does not list "up to 30,000". And while I am quoting you, making the quotes appropriate, this article does not use that quote, making your use a bit disingenuous. The article lists the number cited in the article, 10,000-30,000. And that article does the sanity check, noting that while the number is not itemized, we can infer from history that aside from direct employees, there are a number of ripple effects to vendors, suppliers and business partners that can cost jobs. And the article cites a second researcher that estimates 20k in direct 'payroll' losses, or jobs held by employees directly employed by Sprint or T-Mobile. And a further analyst thinks thats too high, with only 10,000 job losses. Leading to the range. The range used in the Techdirt article comes directly from the linked article, which notes division among analysts.

    By giving that range, and citing a paper which notes several different conclusions that lend to that range, I feel the reporting is appropriate. "up to 30,000" would be inflammatory language, designed to make you forget the 'up to' and only remember the '30,000'.

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