No Daily Affirmation for This Telecom Merger

The proposed merger of AT&T (NYSE: T  ) and T-Mobile USA was never going to be easy for Ma Bell. In addition to about six kinds of regulatory inspections and a very public anti-merger campaign by Sprint Nextel (NYSE: S  ) CEO Dan Hesse, now the deal has enemies in the Senate as well.

According to a letter of protest sent by Sen. Al Franken to FCC chairman Julius Genachowski, three other FCC commissioners, and Attorney General Eric Holder, the blockbuster $39 billion deal would allegedly create a AT&T-plus-Verizon (NYSE: VZ  ) duopoly certain to hurt consumers.

Controlling 82% of the American market for mobile communications between them, Verizon and AT&T-Mobile would impair "consumer prices, customer service, innovation, competition in handsets and the quality and quantity of network coverage," Franken said. Also, he notes, the would-be partners haven't said how many American jobs would be lost to synergies and efficiency reductions -- an important consideration in this unemployment-tainted economy.

Finally, Franken isn't so sure that AT&T really would use T-Mobile's bandwidth licenses to blanket 97% of the nation with so-called 4G coverage, as promised.

Sprint, of course, still hates the merger. AT&T's recently revised proposal "does nothing to change the negative consequences of the takeover for consumers in the form of higher prices, reduced innovation, and decreased investment," Sprint said in a written statement earlier this week. Franken also borrows some market estimates from Sprint's no-deal campaign.

Unsurprisingly, T-Mobile still wants the deal to happen: "While we respect Senator Franken, his analysis of our pending transaction is just wrong." Talking about improved "speed, service, and reduced costs," the company's statement doesn't actually refute Franken's worries about rampant job losses, competition, or innovation. Because, you know, I don't think T-Mobile could do so truthfully.

So we have carefully chosen and probably lawyer-approved statements on both sides. If the merger happens, Sprint is a clear loser. If it falls through, AT&T owes billions in breakup fees. Neither side will likely give up until the last gavel has been smacked.

The only surprise in all of this is the lack of involvement from smaller mobile service providers. Clearly, the outcome of this deal will change the competitive landscape one way or the other. So how come we don't hear either protests or support from Leap Wireless (Nasdaq: LEAP  ) , U.S. Cellular (NYSE: USM  ) , MetroPCS (NYSE: PCS  ) , or USA Mobility (Nasdaq: USMO  ) ?

One small voice might not make a difference, but taken together, these guys might be able to shiftt the debate. And call me crazy, but I don't think they'd be siding with AT&T on this issue. Maybe Al Franken could call up a few allies.

Follow this misguided merger to the end, whether in glorious consummation or a burning wreck. Just click here to add AT&T to your Foolish watchlist, and you won't miss a beat.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Motley Fool newsletter services have recommended buying shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio, follow him on Twitter or Google+, or peruse our Foolish disclosure policy.


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  • Report this Comment On July 28, 2011, at 6:01 PM, reidf1 wrote:

    Sprint is already a loser. Its just a matter of time for them. They lost 131K subscribers this quarter while VZ added over 1mm and ATT added 300k. The phony argument about lack of innovation and service is getting tired. This deal should get done, and then someone get on with taking out Sprint.

  • Report this Comment On July 29, 2011, at 9:34 PM, dinkc wrote:

    are you out of your mind or just working for at&t? just go look at the article talking about how at&t is throttling more people, sure they have the ability to bring 4g to 97% of the us (ha ya right they could allready do that on thier own and then some) but once they do youll be lucky to connect at a decent speed that wont even resemble 3G let alone 4G. and what phone are they gona use when they dont even have 4G availiable yet or a phone that can run 4G, face the facts at&t thinks the only way to get their network better is to just buy someone elses instead of working on their own. wake up and smell the roses,if the deal goes through you think att will need all the engineers they have plus tmobiles? no, goodbye tmobile engineers and techs. however you are clearly the blind following the blind(AT&T)

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