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 @ 12:07pm

    Re: Re: Re: Re: Noose vs Axe

    I appreciate your response. I want to start by addressing #2. "No regulations on how the business operates itself directly." Ok. How will this work out?

    "Have regulations for "no false advertising". Immediately contradicted, it seems. That is a regulation on how the business operates. In fact, any law or regulation would be, by their nature. they are restrictions on how people act. In fact we have those laws, and due to the vaguries of human speech, a regulatory body to lay down predictable guidelines, and bring suit when those guidelines are breached. Removing the regulator doesn't fix the problem, Politicians are still the ones making the laws even if you throw it back to congress. Im not following what you are looking for here.

    "And remove the false advertising fines and just make the offenses jail-able to those that "approve" them. Same for bill stuffing."

    Huh. So you want businesses to work like politicians. Throwing the blame for any infraction on an underling, while allowing the business to keep all profits of their illegal actions, maintaining on of the biggest complaint about regulators, namely the idea that as long as a business can make more money than the regulator fines them, they might as well? The financial penalty was to strip a business of those profits, but the fines often are not in proportion. Or are we only arresting VPs? How do we decide where the buck stops? You have stated that we can't rely on Politicians, it is the reason the regulatory mindset is an issue. But this enforcement mechanism seems perfectly designed for the back alley deals Politicians are known for and this seems to rely on politicians building an entirely new legal framework to hold corporations accountable. I recognize that you seem to think we can force some 100% open communications system. I can see plenty of ways where the corruption doesn't involve any communication between the Regulated and the regulator. And even if not, I can see plenty of ways to keep the big wigs in power and dump underlings, and since there are no monetary penalties, not much incentive to stop. Oh, Free market. Right. Still not sure how any of this incentivises competition over AT&T dumping cash on you to go away. Or encourages me to move from my reliable connection that I know works across the country to a small regional provider that opened last week. Even if they can get the spectrum, and even if we don't encounter the spectrum interference concerns that prompted the licensing of spectrum, it's still a long shot that such an upfront costed venture would see significant investment in the investment-averse market. That is why we discuss things like communications in terms of 'natural monopolies', they defy free market expectations. I have lived through several attempts to bring competition to the energy market in CA, and all they do is cripple CA and raise costs overall before they fail. I have solutions to bring competition to the wireless market, allowing a free market on the service layer, but it involves regulating the infrastructure and those who own the infrastructure. And thats a big no no in your book.

    I apologize for the rant. But you ask us to not rely on politicians, by relying on politicians. I would like some answers to partisan patty cake regulation, but dismantling quicker moving regulators in favor of the slower moving congress and some sort of Executive branch game of "where does the buck stop" is not it.

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