Hesse to Senate committee: Merger of rivals would make Sprint vulnerable

WASHINGTON – Sprint faces an uncertain future if the government allows AT&T and T-Mobile to merge into a single dominant wireless carrier, the company’s top officer told Congress Wednesday.

If the Justice Department approves, the combined company would control 80 percent of the market, leaving Sprint with 17 percent and vulnerable to a takeover, according to Sprint Chief Executive Officer Dan Hesse.

“It would make it more difficult for us to compete,” he told a Senate Judiciary subcommittee looking into the proposed merger. “It puts us in a position to be acquired.”

AT&T hopes to buy T-Mobile for $39 billion. Congress does not have role in the decision, but lawmakers have expressed concerns about how the merger would impact the highly competitive wireless marketplace.

“This is a pivotal moment in American anti-trust law,” Gigi Sohn, president of Public Knowledge, a consumer advocacy group involved in digital issues.

Critics have warned that consumers would be hurt and innovation could suffer if the playing field shrinks by pairing two of the top four wireless carriers. Hesse said that the merger would not only pose problems for Overland Park-based Sprint, but for the overall market as well.

“Robust competition is driving prices down and quality up,” he said.

Randall Stephenson, president and chief executive officer of AT&T, said the wireless market was “vibrant,” and that “history would suggest” that prices would not go up as a result of the merger

Under questioning by Democratic Sen. Amy Klobuchar of Minnesota, Stephenson said that if the merger is approved, his company would continue to offer T-Mobile’s pricing and rate plans, which have been lower than AT&T’s.

“This transaction is all about consumers,” he said. “It’s about keeping up with consumer demand. It’s about having the capacity to drive innovation and competitive prices for consumers.”

But Hesse an AT&T-T-Mobile merger would turn the company into a “gatekeeper” for new technologies and the rest of the field would be last in line: “They will always get it first because of their size and scale.”

In his prepared testimony, Hesse said that AT&T last year offered 53 versions of handsets, Sprint and Verizon each offered 44, and T-Mobile had 37.

With less competition – “a duopoly,” he said – “handset manufacturers will be less likely to partner with anyone other than the duopolists, because access to their nearly 80 percent of the market’s customer base will be sufficient.”

He derided as a “myth” AT&T’s claim that acquiring T-Mobile would allow it to expand its wireless services in rural America. He said that AT&T already has more spectrum holdings than any other wireless carrier, but has decided to “warehouse” for the future.

“If AT&T’s real goal was to reach more people in rural areas, it could invest the $39 billion it is spending to buy T-Mobile to build out service to rural areas rather than raise the prospect of rural development as a pretext to swallow a competitor,” Hesse said in his testimony.

Stephenson said the company was saving unused spectrum for its future technological expansion.