The Empire Fights Back

AT&T (NYSE: T  ) is throwing everything but the Death Star at Capitol Hill to push through its proposed merger with T-Mobile. It has armed its horde of 99 (count 'em) battle-hardened trooper/lobbyists with more than $11 million (so far this year), in large part to create legislative animus against the Department of Justice's anti-merger lawsuit.

AT&T's PsyOps (PR) department has also been busy. It's been peppering D.C. with newspaper ads proclaiming that the deal would give our economy tens of thousands more jobs. But the headline of the ad states why it believes Sprint and its present 4G network provider, Clearwire (Nasdaq: CLWR  ) , don't want the deal to go through:

In case you're wondering why Sprint is trying to kill the AT&T/T-Mobile merger … it's all about spectrum.

Sprint Nextel (NYSE: S  ) , of course, is definitely trying to kill the deal -- with its own lawsuit, and its own lobbying and media campaigns. But more important for Sprint than spectrum is its very survival. It is now a distant third in the present four-horse race, and it would be in an even more untenable position were the merger to go through.

So Sprint's stated opposition to the deal -- as printed in its own full-page newspaper ad in Washington-area papers -- is that the merger would:

… result in two companies controlling more than 77% of wireless industry revenues. … This is a bad idea for consumers, competition and our country.

And bad, certainly, for Sprint.

The second company the ad refers to is Verizon (NYSE: VZ  ) , the present No. 1 domestic wireless carrier in numbers of subscribers. Verizon CEO Lowell McAdam is taking a very Yoda-like view of the whole situation, saying: "The AT&T merger with T-Mobile is kind of like gravity. It had to occur."

What would Yoda do?
Well, McAdam's solution would be that if the government really wants to stop the merger, it needs to have a plan to distribute spectrum: "We're going to watch that very closely." For now, he says, Verizon is staying on the sidelines.

Frankly, that seems like the smartest move at this time.

Fool contributor Dan Radovsky owns shares of AT&T. Motley Fool newsletter services have recommended buying shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On September 21, 2011, at 9:08 PM, Aryabod wrote:

    ATT's biggest problem is they take everyone for being a fool. In aggragate we all know that for this merger to make any sense this merger will not be job accretive in any way. ATT will first have to shed many T mobile positions and subsequently many equipment manufacturers that supply T Mobile infrastructure. Without the merger T Mobile would be compelled to upgrade its networks, hence creating jobs for numerous companies in the supply chain.

    What ATT is not saying is that for every job they create they will be effecting many others who otherwise would be working for companies under different names. In aggregate there is no doubt this merger will end with job losses for the nation as a whole.

    Why any law makers would want this merger to take efffect is dumfounding. Aren't they meant to be looking out for the good of citizens they represent? Eliminating ATT's only GSM competitor only benefits ATT. If this merger is allowed to consummate you can rest assured VZ will have a much easier time acquiring Sprint. Hence what they will have done is essentially taken us back to 1980 when our telecom industry was basically a monopoly gouging the consumer.

  • Report this Comment On September 21, 2011, at 9:57 PM, conradsands wrote:

    Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly -- the American consumer.

    Taking into account the whole U.S. market, a combination of AT&T and T-Mobile would increase the Herfindahl-Hirschman Index (HHI), a widely accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.

    If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so beware of how things could “mysteriously” turn in this case.

    “It’s only a slight overstatement to say that if they weren’t going to block this one, the Justice Department might as well just throw the antitrust guidelines out the window,” said Herbert Hovenkamp, professor of law at the University of Iowa, who is considered by many to be the dean of American antitrust law. “This merger clearly seems to violate them.”

  • Report this Comment On September 21, 2011, at 9:57 PM, conradsands wrote:

    AT&T’s Dirty Money at Work …

    Snippets from CNN story …

    AT&T lobbyists push for T-Mobile deal

    For years, AT&T has been one of the biggest political and lobbying forces in Washington, D.C. Last year, it spent $15.3 million and had 93 lobbyists on its roster, including six former lawmakers. Germany's Deutsche Telekom spent $3 million on lobbying for T-Mobile USA in 2010, armed with 41 lobbyists and one former lawmaker.

    Many lawmakers have a personal interest in seeing AT&T do well. AT&T ranked as the sixth most popular investment among members of the House and Senate in 2009, the most recent year for which such data is available, according to the Center for Responsive Politics.

    And AT&T is considered a heavy hitter during campaign election cycles. In 2010, donors with links to the company made nearly $4 million in campaign contributions to candidates running for federal office.

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