Sprint Nextel comes out officially against AT&T/T-Mobile USA deal

Sprint Nextel Corp. (S) appears set to take a hard-line stance on AT&T Inc.’s (T) proposed acquisition of T-Mobile USA Inc. (DTEGY), which would put pressure on the industry’s third largest wireless provider.
In a statement released today, Sprint Nextel noted the $39 billion deal would “reverse nearly three decades of actions by the U.S. government and the courts that modernized and opened U.S. communications markets to competition. The wireless industry has sparked unprecedented levels of competition, innovation, job creation and investment for the American economy, all of which could be undone by this transaction.”
The statement followed similar remarks by Sprint Nextel CEO Dan Hesse at last week’s CTIA event in Orlando, Fla., where while flanked on stage by Verizon Wireless CEO Dan Mead and AT&T Mobility CEO Ralph de la Vega, Hesse stated his opposition to the proposed deal.
Sprint Nextel continued that with AT&T Mobility and Verizon Wireless “by far” the largest wireless providers, approving AT&T’s acquisition of the industry’s No. 4 operator in T-Mobile USA would create a carrier nearly three times the size of Sprint Nextel. (A figure that has only recently began to improve following several disastrous years for Sprint Nextel following Sprint Corp.’s $35 billion acquisition of Nextel Communications Inc. in 2004.)
Sprint Nextel noted that a post-AT&T Mobility/T-Mobile USA landscape would show considerable consolidation amongst two wireless carriers “as well as the availability and price of key inputs, such as backhaul and access needed by other wireless companies to compete.”
“Sprint urges the United States government to block this anti-competitive acquisition,” said Vonya McCann, senior vice president, Government Affairs. “This transaction will harm consumers and harm competition at a time when this country can least afford it. … So on behalf of our customers, our industry and our country, Sprint will fight this attempt by AT&T to undo the progress of the past 25 years and create a new Ma Bell duopoly.”
AT&T has been somewhat subdued in its response, merely reiterating its original talking points that the current wireless industry is competitive and that if approved the strengthened company would be able to provide wireless broadband services using LTE technology to 95% of the country’s population.
“With regard to Sprint’s recent statements about our transaction, we have always found that the most constructive course is to focus on our own strategies for serving our customers and building our business rather than becoming distracted by challenging the business strategies of others,” noted Jim Cicconi, AT&T’s senior executive VP of external and legislative affairs in a statement.
The “competitiveness” of the industry is based on figures prior to a combined AT&T Mobility/T-Mobile USA operation, with the 95% coverage claim still leaving out about 15 million people living in the United States. That would be equal to the populations of West Virginia; Nebraska; Idaho; Hawaii; Maine; New Hampshire; Rhode Island; Montana; Delaware; South Dakota; Alaska; North Dakota; Vermont; Wyoming; and Washington, D.C. Or roughly the population of New York City, Los Angeles and Chicago, combined.
The Rural Cellular Association came out almost immediately against the deal after it was announced claiming the combined operations would further diminish wireless competition.
“This proposed acquisition of T-Mobile by AT&T is a real game changer for all tier two and tier three carriers,” said RCA President and CEO Steven K. Berry. “The FCC will have to address the competitive connectivity issues such as data roaming, interoperability and availability of devices, success-based USF reform and spectrum allocation policy – all of which will help promote a competitive industry.”
Industry analysts have been mixed on the proposed transaction with some noting the deal will indeed provide AT&T Mobility with the spectrum resources needed to support the increasing demand for mobile broadband services that are beginning to tax current networks, while others note the move would help solidify Sprint Nextel as the value leader amongst nationwide operators.