T-Mobile CEO Insists New Merger Will Create Jobs, Competition. Wall Street, History Disagree.

Predictions

from the merge-ALL-the-things dept

Historically, large telecom mergers don’t end well for consumers or employees. Usually in the wake of these megadeals nothing much happens for about a year, after which the acquiring company begins trimming back redundant positions and offices. In telecom, growth for growth’s sake also usually has a detrimental impact on customer service, investment in which takes a back seat to getting acquired systems and employees in sync (see: Comcast). And more often than not, mindless consolidation in telecom tends to slowly reduce overall players in the space, resulting in higher prices and apathy no matter how many promises to the contrary are made by the merging companies (see: Charter, Time Warner Cable).

As T-Mobile and Sprint attempt to merge (once again), their executives are throwing out all the usual claims ahead of such mergers: that the merger will create immeasurable “synergies”; that the reduction of major U.S. wireless competitors from four to three will somehow create competition; that the deal will somehow make it easier for them to deploy next-gen “5G” networks; and that the deal will somehow magically create oodles of new jobs.

At a meeting with Sprint employees this week, T-Mobile CEO John Legere tried to ease employees’ worries that many of them would be out of a job once the two carriers are fused into one. This merger, Legere told employees, would somehow be different (he failed to offer any solid reasons why):

“Synergies? is a scary word for people,? acknowledged T-Mobile?s Legere in comments to Sprint employees during Sprint?s town hall meeting with T-Mobile?s management. ?In general, in mergers and in things that are done that are just about survival, synergy usually means people losing jobs, supply going down. This is a very, very unique merger. And as Marcelo [Claure, Sprint?s former CEO] said, when you raise that little right hand and swear to tell the truth, the whole truth, and nothing but the truth, when you say we?re going to add jobs, we?re going to add jobs.”

It’s worth bookmarking that claim for posterity. Especially since this is the exact opposite of what most Wall Street analysts are saying. Analysts are predicting anywhere between 10,000 and 30,000 potential jobs lost (the latter being nearly as many employees as Sprint has) as the new, bigger T-Mobile sets about eliminating redundant positions, especially in retail. But Legere, undaundted, didn’t just stop there, insisting that the job creation from the merger could be even more spectacular for some, unspecified reason:

“We?ve said it from day one: There will be more jobs on day one and every day thereafter than both companies. And by the way, that?s assuming that both companies are successful with the plans that they had laid out. Right? So it could be even more than what would ultimately happen,? he said.

Continued Legere: ?Two is those come in different varieties, but year one, you can expect 3,000 more jobs. Right? By 2024, 11, 000 more jobs. We need at least 5,000 new Care positions. We?re going to build new retail stores. Okay? A lot of network investment in jobs. New businesses that we?re entering into that we don?t have the talent or capability from.”

Legere’s likely going to get a pass for this because, in stark contrast to most telecom CEOs, he’s “brash” and funny. But that doesn’t really change the historical precedent that, as anybody who has watched or lived through a telecom merger can attest, a sizable erosion of jobs is simply part of the equation. Again, for about a year after most deals you’ll hear near-endless assurances that “nothing is going to change,” until, of course, it does.

Mega Deals are usually fantastic for both shareholders and executives, in part because they quite often reduce competition, therefore increasing market power and reducing any incentive to oh, try. But megamergers are almost always harmful for consumers, yet every time one comes up the press coverage just kind of floats over that fact, with “he said, she said” reporting never really pointing out the lessons of history. That’s especially true in telecom, where the downsides of a relentless, almost mindless urge to consolidate are abundantly obvious, but always play second fiddle to CEO promises that this time will be different.

The companies’ previous merger attempt was blocked in 2014 after regulators noted that removing one of just four major carriers would result in a proportionally-lower incentive to actually compete on price, something that’s really not debatable if you’ve paid attention to telecom and broadband industry history. That’s especially true in Canada, where consolidation to just three players has resulted in some of the highest mobile data prices in the developed world. AT&T’s attempt to acquire T-Mobile in 2011 was blocked for the same reason, a move many forget resulted in T-Mobile being more competitive than ever.

Whether this effort gets approved still isn’t clear, though the Ajit Pai FCC’s tendency to rubber stamp most industry desires isn’t boding well for opponents of the $23 billion super-union. It’s not really clear why American consumers and the press, time and time again, blindly believe promises of merger synergies like some perpetual game of Charlie Brown and Lucy playing “football.” But what is clear is that this gullibility isn’t something that’s going away any time soon.

Filed Under: competition, jobs, john legere, merger, mobile carriers, synergies
Companies: sprint, t-mobile